The U.S. Chamber of Commerce issued a statement of principles on insurance regulatory reform last week that opposes rate regulation but does not take a stand on whether oversight should remain state-based or directly involve the federal government.
Opponents of legislation that would create an optional federal charter were buoyed by the Chamber's apparent decision not to step into the battle over whether the best approach was the current state-based system, or if companies and agents should instead be given the option to have federal regulation.
However, supporters of an OFC also took comfort in the Chamber statement.
The statement said that "protection of insurance consumers must remain paramount." It also said "competition among insurers must remain paramount," adding that "competition among insurers should be encouraged."
Specifically, the statement added, "An open and competitive insurance market will allow for the development and delivery of the best products at the lowest cost, and enable insurers to better compete in domestic and global markets."
It also said that "to maximize efficiency, markets, not regulators, should establish prices for those product lines (e.g., property and casualty) that are currently subject to regulatory controls on rates."
"One of the fundamental aspects of economics is that price controls lead to inefficient markets," the Chamber said. "To maximize efficiency and to best meet the needs of consumers, insurance product pricing should be based on prudent actuarial principles and not subject to government price controls."
The Chamber also said that oversight of insurance markets "should be conducted in a manner that seeks to minimize undue regulatory burdens and compliance costs. A uniform and efficient supervisory system with respect to licensing, product design, market conduct and other oversight functions would stand to benefit those who buy, sell and underwrite insurance."
On international competitiveness, the statement said, "Policymakers must ensure that insurance regulators can sufficiently represent the interests and views of U.S. insurers and consumers in the negotiation of international agreements and global regulatory matters."
Speaking for those who oppose an OFC, Justin Roth, senior federal affairs director at the National Association of Mutual Insurance Companies, said the trade group is "pleased that the Chamber continued its tradition of staying neutral on legislation on which their members and the entire insurance industry are sharply divided."
Both NAMIC and the Independent Insurance Agents and Brokers of America said they "welcomed" the Chamber's involvement in the insurance regulatory reform debate, and look forward to working with the Chamber and its members on the issue.
On issues addressed in the statement of principles–such as consumer protection, efficient regulation and market protection–Mr. Roth said NAMIC "believes that creating an OFC would be a step backward, and that any reform would be better accomplished at the state level."
Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America, added that his group "welcomes the Chamber's involvement in the insurance regulatory reform debate. We look forward to working with the Chamber and its members on this important issue and continuing to share our ideas on how to modernize the state regulatory system."
For its part, the American Insurance Association–a strong OFC backer–said it was "happy" the Chamber "has abandoned their previous unconditional support for state insurance regulation in favor of judging the system by its adherence to sound regulatory and free market principles."
Dennis Kelly, head of federal media affairs for the AIA, said, "This is a thoughtful and important development, particularly to the extent that the new policy principles recognize that government price controls actually hurt consumers, and that America needs to speak with one voice on insurance issues in the global economy."
Eli Lehrer, a senior fellow at the Competitive Enterprise Institute, who has written extensively on insurance regulation, interpreted the Chamber report as "supporting the principles" contained in the House and Senate bills that would create an optional federal charter.
But as to specifics, he said the Chamber's statement of principles appear to be "agnostic on the exact way certain ends are achieved."
"I'm really happy that the Chamber is coming around to supporting creative insurance reform that will benefit consumers," said Mr. Lehrer. "Most of their members buy in the commercial lines segment, which is significantly more creative and, not surprisingly, less regulated, than the personal lines property and casualty segment."
© 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.