State Legislators Balk At Congress' Road Map

The NCOIL views should ensure a lively discussion at a hearing on the legislation. All that has been released so far on the legislation, known informally as the "road map," is a draft.

The bill is officially titled the State Modernization and Regulatory Transparency (SMART) Act The bill is now scheduled to be introduced by the Republican leadership of the House Financial Services Committee this month, with a hearing later. Original plans were for a markup on the legislation to be held by mid-October in the Capital Markets Subcommittee of the Financial Services panel.

Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, had also said in mid-July that he planned to hold a committee hearing on insurance issues Sept. 21. Whether the response from state legislators on the House proposal will cause him to rethink those plans is unclear.

The state legislators' message was timed for Saturday's opening of the quarterly meeting of the National Association of Insurance Commissioners currently underway in Alaska.

The letter was sent to Reps. Michael Oxley, R-Ohio, chairman of the panel, and Richard Baker, R-La., chairman of the key Capital Markets Subcommittee. Mr. Baker played a key role in the drafting of the bill by the majority staff of the Financial Services panel.

In a letter signed by Sen. Steve Geller, president, representing the group's executive committee, NCOIL said it "cannot support" the SMART Act because "it could undermine the role of state legislatures in the development of insurance public policy and undermine the authority of state insurance commissioners."

In the letter, Mr. Geller told Mr. Oxley and Mr. Baker that state insurance commissioners "are elected in no less than 12 states, two of those states being the most populous in the nation." It would "as well" undermine the authority "of state insurance commissioners who are duly appointed by their elected governors," he said.

In general, Mr. Geller said, NCOIL cannot support any federal legislation that would encroach upon the states' authority to develop insurance public policy. Federal intervention in the regulation of insurance would cast aside the insurance public policy expertise of state legislatures and state insurance regulators in favor of an untested and inflexible system."

The states' negative response to the legislation was signaled several weeks ago in comments from New York Insurance Superintendent Greg Serio, who heads the NAIC government affairs committee.

In general, Mr. Serio said that while the House panel had kept the NAIC informed of all its deliberations and the proposed road map, the NAIC had strong concerns about two key provisions of the draft road map, a provision calling for total rate deregulation, including a phase-in of personal lines deregulation, and a provision calling for an ongoing federal presence in state insurance regulation.

The federal presence would take the form of a panel titled "the State/Federal Partnership." Under the bill, this would be a seven-member body composed of three state insurance commissioners?one from large states, one from small states and one from medium-sized states?representatives of the Treasury Dept., the Securities and Exchange Commission and the Federal Reserve Board, and a chairman to be nominated by the NAIC and appointed by the President.