Howdy, Partner!
Here in Hoboken, I could almost hear the sighs of relief from the other side of the Hudson River as state regulators meeting in Manhattan received assurances from a key member of Congress that their jobs were safe at least for now.
Rep. Michael Oxley, R-Ohio, who chairs the House Financial Services Committee, does not intend to preempt state insurance regulation anytime soon. Instead, members of the National Association of Insurance Commissioners said that he envisions a "full federal-state partnership," with locals continuing to do the heavy lifting.
Rep. Oxley left the Beltway to deliver the good news to state regulators personally, telling a Commissioners Roundtable during the NAIC's spring meeting in New York that his committee would not call for an optional federal charter or create a federal regulator. That was music to the ears of NAIC attendees, who were sweating over whether Congress would pull the rug out from under them by establishing a dual regulatory system.
Rep. Oxley spoke about cooperation and federal support, rather than usurping state authority. He is taking the path of least resistance, focusing on a federal tools approach already being contemplated by the NAIC and other industry players.
I wasn't surprised to see Rep. Oxley extend an olive branch. After all, with a huge budget deficit looming, how much support could be expected in Congress for the creation of a potentially massive federal bureaucracy to oversee insurers? Even an optional federal charter would require significant dollars and manpower to implement properly. The feds just do not have the dough to pull it off.
I also still fail to see the need for federal intervention. State regulation has proven clunky at times, but in terms of market conduct and financial security, the states have basically gotten the job done. We have a lot more pressing national issues than insurance regulation to worry about right now.
Under the circumstances, it makes a lot of sense to give a regulatory "partnership" a chance. The trick will be to negotiate the terms of such a collaboration to make sure the partnership is an equal one. The fun begins on March 31, when Rep. Oxley's committee is scheduled to hold a hearing on federal oversight.
What did surprise me is how quickly so many industry players jumped on board this relatively modest bandwagon. Of course, NAIC and its members are happy to lead the parade if it means they can retain ultimate control over day-to-day operations. And there are those, such as the Independent Insurance Agents & Brokers of America, who were already pushing an approach similar to the one outlined by Rep. Oxley essentially, to use federal leverage to make the regulatory system more uniform, while leaving the nitty-gritty of regulation to the states.
However, others who have been enthusiastically backing a major federal role at the very least the option of choosing a federal charter were also quick to praise Rep. Oxley. That could just be political reality settling in, as those who want Uncle Sam overseeing insurance believe that a loose regulatory "partnership" is about all they could expect in this environment.
Whatever the reasons, this is a good development for the industry, which has been fractured badly over this issue. Now, perhaps, all industry groups agents and carriers, life and property-casualty can get together behind one measure that will allow significant federal involvement in the regulatory reform process without giving away the store to Washington.
Sam Friedman
Editor-In-Chief
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 25, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.