P-C, Life Agent Groups Warring Over Fed Charter

Responding to the life agent group's move, the leader of the Alexandria, Va.-based Independent Insurance Agents and Brokers of America suggested federal oversight could have explosive consequences, including an avalanche of federal probes of the life insurance industry.

The Falls Church, Va.-based NAIFA, which represents some 70,000 life and health agents nationwide, said that it continues its century-long support for state regulation and its commitment to improve the state-based system.

However, NAIFA said that certain federal initiatives could work to improve the regulation of insurance. These include optional federal charters, creation of a federal insurance advocate, and an optional national producer's license for insurance professionals.

"NAIFA believes that the federal government could, with our input, bring about much-needed improvement to insurance regulation for the benefit of consumers and the insurance industry," said NAIFA President Randy R. Kilgore.

"While NAIFA stands by its support of state regulation, the changing dynamics of the financial services industry in the 21st century compels us to be open-minded to all promising options to improve the regulation of the industry," he said.

However, Robert Rusbuldt, chief executive officer of the Independent Insurance Agents and Brokers of America, which opposes optional federal chartering, challenged NAIFA, arguing that "those advocating OFC are playing with dynamite."

NAIFA's new policy says that properly enacted federal initiatives could produce important benefits. These include:

? An optional national producer's license as an alternative to multiple-state licensing rules.

? A single point of filing for approval of insurance products.

? A federal insurance advocate who can address the needs of consumers and the insurance industry on a national level, as well as provide Congress and the federal government with industry expertise.

NAIFA now joins its major colleague in the life insurance industry?the Washington-based American Council of Life Insurers?in support of OFC. Gary Hughes, senior vice president with ACLI, called the NAIFA position "a very encouraging development."

It is important to note, Mr. Hughes said, that on the life insurance side of the industry, there is now unanimity. Companies and agents all view regulatory reform as a priority and see a federal option as a significant part of that reform.

Gary Karr, a representative of the Washington-based American Insurance Association, which also supports OFC, said AIA welcomes to the table all those who advocate solutions to the broken insurance regulatory system. AIA, he said, believes the best solution is OFC and is happy that NAIFA agrees.

However, IIABA's Mr. Rusbuldt said people forget that in the 1970s and 1980s, the Federal Trade Commission and other executive branch departments and agencies closely scrutinized the life insurance industry. The federal government, he noted, studied the front-loading of commissions, anti-rebating laws, suitability and rates of return on whole life insurance policies.

The industry finally had to get Congress to pass a law barring the FTC and other agencies from trying to exercise oversight of the industry, recalled Mr. Rusbuldt, whose association represents some 300,000 p-c agency owners and their employees.

If there is federal regulation, Mr. Rusbuldt said, there will be new investigations of the industry by the FTC and other agencies. "The feds will go after the industry like gangbusters," he predicted.

He said that while IIABA understands the desire for a single regulator, the political reality is that there will be a huge number of unintended and unforeseen consequences.

Mr. Rusbuldt said that the life insurance industry will get everything it wants through a federal standards approach being developed by IIABA along with insurance companies and regulators. This proposal, he said, will address issues such as agent licensing and speed-to-market, while leaving actual regulation in the hands of the states.