Insurers, Consumers Need Leadership, Not Fence-Sitting

The American Insurance Association strongly disagrees with Sam Friedman's April 17 editorial, “A View From the Fence.” When it comes to reforming state insurance regulation, fence-sitting is exactly where the process of reform has been for decades–the result has been virtually no meaningful regulatory modernization.

Recently, thoughtful legislation has been introduced on Capitol Hill that will bring the property-casualty insurance industry into the 21st century–the National Insurance Act. S. 2509 has broad insurance and financial services sector support, because it offers long-awaited solutions to marketplace problems that inhibit insurers from serving their customers to the fullest.

The call for regulatory reform is neither recent nor sudden. The long-standing cry for reform arises from an industry that has endured the impotence of state regulatory reform efforts for decades.

It is time to offer a competitive alternative to today's dysfunctional regulatory system, where personal and commercial lines consumers have been deprived of real benefits from competition and product innovation–due primarily to a convoluted and economically discredited web of government price and product controls. Consumers should no longer be subjected to this system's multiple costs.

S. 2509 would not intrude upon state regulation. It is an optional alternative to the current patchwork state regulatory system–a system that would be preserved for those who choose to remain state-regulated.

In addition, the National Insurance Act would create a national regulator (within the Treasury Department) and oversight framework that largely would replicate–and in some ways improve upon–the successful regulatory system governing nationally chartered banks. Funding for this Office of National Insurance would be provided by insurers.

Contrary to the opinions expressed in Mr. Friedman's editorial, this is not a time for being timid, stepping backward, or waiting. Effective, market-based regulation as proposed in S. 2509 will bring about much-needed reforms so that p-c insurers can better help consumers manage individual and business risks.

Natural disasters do not wait. Overseas competitors are not stepping back. Neither should the U.S. insurance industry.

This is a time for forward-thinking and proactive leadership. If the campaign to enact an optional federal charter will be a lengthy process, then we say, “Let's get started now.” We welcome anyone to come down off the fence, step forward, and join in the debate.