Washington–Testifying before a House Financial Services subcommittee today, former state insurance regulators offered a measure of support for the proposed State Modernization and Regulatory Transparency Act (SMART) that aims to standardize insurance industry regulation.
Several of the regulators took issue with the National Association of Insurance Commissioners' (NAIC) doomsday analysis that the proposed legislation incorporates "unacceptable levels of federal preemption that would create both legal and practical problems for the insurance industry and its customers."
Form Ohio Insurance Commissioner Lee Covington said preemption provisions in the proposed legislation are only a "last resort."
Other ex-regulators in their testimony before the Capital Markets Subcommittee of the House Financial Services Committee surprisingly voiced strong support for rate deregulation–the most controversial issue being dealt with in the SMART Act.
The measure was proposed by Financial Services Chairman Michael Oxley, R-Ohio, and Rep. Richard Baker, R-La., who chairs the Capital Markets subcommittee. The bill has not yet been introduced, but Rep. Baker noted at the hearing today that a draft has been distributed "to as many stakeholders as we could find."
Also testifying at the hearing was current NAIC President Diane Koken, the Pennsylvania insurance commissioner, who said that the proposal could be tripped up by numerous potential challenges to its legality.
"The states believe it is constructive to point out basic constitutional, legal and operational problems that would undermine the SMART Act's stated purposes," she said.
She added that "state insurance regulators are public servants representing the same people who are your congressional constituents," clearly implying that the regulators would seek to pressure committee members in their own districts if they continue to proceed with the bill.
Although the former regulators were restrained in their comments, others within the insurance industry offered strong support of the SMART Act proposal in response to the hearing.
"We are very pleased with the commencement of hearings on this crucial, much-needed reform legislation," said Charles E. Symington Jr., senior vice president for governmental affairs for the Independent Insurance Agents and Brokers of America.
The agents group supports the SMART Act proposal, "because it believes very strongly that reform of the existing insurance regulatory system is necessary but that the current state-based framework should be preserved," Mr. Symington said, adding that the group opposes federal regulation of insurance, including proposals for an "optional" federal charter.
Some committee members used today's hearing as a venue to promote just that option, most notably Ranking Member Paul Kanjorski, D-Penn., who noted that "the consensus for creating such a charter continues to grow."
"Rather than overlaying a federal bureaucracy on top of state regulation, an optional federal charter would, in my view, create a sensible, separate and streamlined regulatory system," Rep. Kanjorski added.
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