Kanjorski Says Bill Is Ready To Create U.S. Insurance Agency

WASHINGTON-- A key lawmaker said at a House hearing on financial reform today that he is ready to introduce legislation creating a federal insurance regulatory agency.

The announcement came from Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Service Committee's Capital Markets Subcommittee, before the panel heard testimony today on the Bush administration's plan for financial reform

Mr. Kanjorski said he will introduce a bill Thursday that will seek to create an interim federal insurance oversight agency, the Office of Insurance Information, within the U.S. Treasury Department.

The interim office would focus on gathering information about the insurance industry and coordinating with state regulators on pressing insurance regulatory issues.

At the hearing a Bush administration official gave testimony supporting House and Senate bills creating an optional federal insurance charter regulated through a federal agency.

But state regulators at the hearing by the Capital Markets Subcommittee of the House Financial Services Committee argued against the viewpoint put forward by David Nason, assistant secretary of the Treasury.

They defended the current state-based system, saying standardization and changes in existing law "offers the level of comprehensive reform to which the nation should aspire."

Mr. Nason's remarks hinting at support for specific legislation was an expansion of the Bush administration's "Blueprint for a Modernized Financial Regulatory System" that was first put forward last month by the Treasury.

In response to Rep. Kanjorski's statement that he would introduce a bill, Mr. Nason said that he's "delighted" about it and "We look forward to working with him on legislation."

The conflicting administration and regulator comments came at a hearing called by the committee for "Examining Proposals to Reform Insurance Regulation."

Mr. Nason said, "The establishment of a dual federal/state system with an OFC provides the best opportunity for the establishment of a modern and comprehensive system of insurance regulation."

Speaking on behalf of the National Association of Insurance Commissioners in defense of the current state-based system, Eric Dinallo, New York insurance superintendent, acknowledged that "the current system is not perfect and there are important steps to be taken to reach those goals."

But, he said, "insurance regulators have been improving their skills and policies and enhancing resources over the past several years."

He added, "We are equally mindful of the need for further changes in the law and the need to standardize."

The hearing marked the first time competing views on the future of insurance regulation had been aired in one forum since the Treasury blueprint was unveiled on March 31.

One of the major components of the blueprint is the administration's decision to embrace federal regulation of insurance.

In his testimony, Mr. Nason expanded on the administration's position and talked about the current bills creating an OFC.

"There are currently pending bills in both the House (H.R. 3200) and Senate (S. 40) titled the 'National Insurance Act of 2007' that would create an OFC and establish an Office of National Insurance [within Treasury]," Mr. Nason testified.

"These bills contain many of the core concepts surrounding the establishment of an OFC structure," he added. "We look forward to evaluating further the specific provisions of these bills."

Speaking for supporters of an OFC within the industry, a representative of the American Council of Life Insurance and the American Insurance Association said that consumers would be the "major beneficiaries of an OFC system of insurance regulation, enjoying strong, national consumer protection standards and a more competitive and efficient marketplace."

Alastair Shore, chief underwriter of CUNA Mutual Group, added, "An OFC, as set forth in the National Insurance Act (NIA) of 2007, represents our best opportunity to advance regulatory modernization in a manner that works for consumers, the industry and the economy."

He noted, "At its core, the NIA is a strong consumer protection bill, which focuses on a robust centralized system that emphasizes safety and soundness and consistent market conduct regulation."

Mr. Shore said the Treasury blueprint recognizes the need for OFC and the role "that the insurance industry plays in the new world of integrated and interconnected financial markets."

He added, "Treasury's report also notes that the disjointed state insurance regulatory system imposes increased cost and efficiency burdens on insurers and consumers alike."

Representatives of trade groups representing producers of property-casualty insurance products defended the current, state-based system.

Tom Minkler, chairman of the Government Affairs Committee of the Independent Insurance Agents and Brokers, testified, "As we have for over 100 years, IIABA supports state regulation of insurance--for all participants and for all activities in the marketplace--and we oppose any form of federal regulation, optional or otherwise."

He said also, "Congress can play a 'vital role' in helping to modernize the state system and overcome the obstacles to reform that currently exist; however, such an effort need not replace or duplicate at the federal level what is already in place and working well at the state level."

Specifically, he asked Congress to enact the National Association of Registered Agents and Brokers (NARAB) Reform Act (H.R. 5611), that would provide a nationally accepted license for agents.

"This legislation would streamline nonresident insurance agent licensing but is deferential to states' rights--day-to-day state insurance laws and regulations would not be affected by this legislation," Mr. Minkler said.

Donna Pile, immediate past president of the National Association of Professional Insurance Agents, testified that "the important thing to remember when you talk about uniform licensing for insurance producers is that we already have a system that is up and running in almost all jurisdictions and can be completed in other jurisdictions soon."

So, she added, "there is no need to build it again from scratch. The most substantial portion of the investment has already been made by the states."

"If I am permitted a little baseball analogy, it's like this: The NIPR [state-run National Insurance Producer Registry] is the diamond that connects all the bases needed for a one-stop process for producer licensing," Ms. Pile said. "Right now, we have already rounded third base. Now all we have to do is hustle a little more before we can cross home plate."