Washington–A rift has erupted between two financial services trade groups over how best to modernize the insurance regulatory system.
In a statement today, the Optional Federal Charter Coalition (OFCC) voiced "disappointment" and called "inaccurate" the reaction of the Independent Insurance Agents and Brokers of America to a letter the OFCC sent to the Senate Banking Committee June 13.
The OFCC letter, signed by 135 financial services industry companies, said that the current insurance regulatory system is broken and the most appropriate way to deal with it is to provide companies with an option to have a federal insurance charter.
The letter sent by the so-called Big I in response said an optional federal charter was unnecessary and the legislation now being drafted by the House Financial Services Committee creating federal standards for insurance regulation was more appropriate.
The House bill is being called SMART, for State Modernization and Regulatory Transparency Act. It is expected to be introduced before Congress leaves for a month's summer recess July 29.
The SMART bill is being drafted by the Republican leadership of the committee, headed by Reps. Mike Oxley, Ohio, chairman, and Richard Baker, La., chairman of the Capital Markets Subcommittee.
In responding to the latest OFCC statement June 21, the Big I denied any inaccuracies.
Amongst the members of the OFCC are the American Insurance Association, the American Council of Life Insurance, and the Council of Insurance Agents and Brokers. The Financial Services Forum and the Financial Services Roundtable, both pan-industry trade groups with a cross section of insurance, banking and securities industries members, are also members of the OFCC.
"The reaction of the Independent Insurance Agents & Brokers of America (IIABA) to our June 13 letter expressing broad industry support for an insurance federal charter option is disappointing and inaccurate," the OFCC said in a statement released by the American Bankers Association. An ABA offshoot, the American Bankers Insurance Association, did most of the work in developing the letter and getting financial services companies to sign it.
The statement adds, "It is beyond dispute that major restructuring of the insurance regulatory framework is long overdue and that the status quo is no longer a viable option.
"The rigid confines of the past work to the disadvantage of our customers and deny companies, agents and brokers the flexibility they need to compete effectively in today's marketplace."
The OFCC statement also said that insurance regulatory reform "must be driven by the needs of our customers and by the demands of operational efficiency. The optional federal charter initiative does just that."
In a statement defending the Big I's position, Robert Rusbuldt, CEO, said the trade group "strongly denies any inaccuracies in our characterization of optional federal regulation or the Oxley/Baker SMART proposal."
In fact, Mr. Rusbuldt said, "We agree with the OFCC statement that, 'indeed, insurance regulatory reform must be driven by the needs of our customers and by the demands of operational efficiency.'"
However, he said, "We disagree with the OFCC on the means to obtain this goal. We believe that targeted federal reform of the state system, proposed and supported by Chairman Oxley and Chairman Baker in the SMART Act proposal, makes much more sense for insurance consumers and for bringing about immediate efficiency in our regulatory system.
"Although we agree on the goals, because we disagree on the means to obtain those goals it appears that the OFCC has made a false allegation that we are inaccurate," Mr. Rusbuldt said.
"This is not about the number of supporters vs. opponents since agents and regional companies overwhelmingly oppose federal regulation of insurance. However, independent agents strongly support reform of the current system."
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