States Urged To Hasten Reform

Rep. Baker said there should be a time line for state insurance regulatory reform. He asked witnesses how they would feel if Congress approved legislation which said that if states do not create a uniform national system by a certain time, Congress would mandate one.

Arkansas Insurance Commissioner Mike Pickens, president of the Kansas City, Mo.-based NAIC, said NAIC already has a plan to create such a system, and it is on time and on target.

Mr. Pickens noted that the NAIC has agreed on an insurance regulatory modernization action plan that focuses on areas such as producer licensing, speed-to-market and market conduct.

Rep. Baker, however, continued to press Mr. Pickens on how long Congress should wait for the states to adopt the plan. "Two years? 20 years?" he asked.

Mr. Pickens replied that the plan sets deadlines for all the major areas needing reforms. Some will be completed by December of this year, he said, while some go as far as 2008.

But Rep. Paul Kanjorski, D-Pa., said that waiting until the year 2008 to enact a national program of insurance regulation is "too long and too late."

He said that if the task cannot be accomplished within the next 18 months, he would support federal legislation.

Mr. Pickens, however, said that if the federal government tried to take over insurance regulation, it would take at least until 2008 for the government to get up to speed.

Moreover, he said, most of the calls for optional federal chartering are coming from the largest banks and life insurance companies. On the property-casualty side, he said, three of the four major trade association favor state regulation.

Mr. Pickens said that when it comes to grass roots constituents, the state insurance commissioner is the only person who stands between consumers and big businesses.

He challenged members to ask their constituents whether they really want to have to call a federal regulator with concerns over whether their insurance company is willing to pay for a new roof.

Those "911 calls," Mr. Pickens said, are local, not long distance. Moreover, he said, an optional federal chartering system would inevitably lead to a new bureaucracy in Washington.

Inevitably, Mr. Pickens said, this would lead to a loss to the states of premium taxes, because the federal government would have to find some way to fund the new bureaucracy.

Rep. Christopher Shays, R-Conn., noted that the European Union has a single insurance directive. He questioned whether U.S. companies were at a competitive disadvantage by having to deal domestically with 50 different jurisdictions.

New York Insurance Superintendent Greg Serio responded that while there may be a unified EU market, European companies still have to deal with different national regulators. Moreover, he noted, some lines are regulated locally.

The EU, Mr. Serio said, is trying to sort things out on regulatory constructs just as is the NAIC.

Neil Breslin, a New York State Senator who testified on behalf of the Albany, N.Y.-based National Conference of Insurance Legislators, added that the states are working with NAIC to implement its reform agenda on schedule.

"State legislators are acutely aware of the forces at work to create an optional federal charter for insurance companies," he said in his prepared statement.

"Our heads are not in the sand. We understand that political and marketplace realities demand that we improve state regulation. We understand that the status quo is not an option," Mr. Breslin said.

He noted that on producer licensing reform, some 41 states now meet the reciprocity requirement that was outlined in the Gramm-Leach-Bliley Act. Moreover, he said, he expects NAIC to certify New York as the 42^nd state.

On speed-to-market, Mr. Breslin said, NCOIL has adopted a model that is a step towards the competitive rating system in Illinois. "I am here to say that insurance regulatory reform is well on its way," he said.