Feds Poised To Act If States Don't Reform Regulation, NAIC Warned

Those participating included the heads of PCI, the National Association of Mutual Insurance Companies, the Independent Insurance Agents and Brokers of America, and the Council of Insurance Agents and Brokers.

However, no invitation to participate was made to the American Insurance Association or the American Council of Life Insurers, according to officials of those trade groups. The two groups are leading the effort to pass federal legislation creating an optional federal charter for insurers.

Also among the participants were Sen. Richard Durbin, D-Ill., who is majority whip of the Senate; Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee; and Rep. Earl Pomeroy, D-N.D., a former state insurance commissioner and NAIC president.

National Underwriter was unable to contact these officials by press time. Their presence was confirmed by representatives of the trade groups that did participate.

PCI, IIABA and NAMIC are longtime supporters of continued state regulation of insurance, although PCI's Mr. Sampson told NU last week the group is now focused on the quality of regulation, regardless of its location. IIABA has also indicated it is open to some federal involvement, but more in terms of setting regulatory benchmarks for the states to implement, or in helping to establish a national producer licensing body.

The CIAB was asked to testify because it supports uniform state licensing and also seeks backing from state regulators of the legislation passed by the House last year that would simplify regulation of surplus lines and reinsurance. The latter bill could be the subject of a hearing in the Senate Banking Committee as early as next month.

Joel Wood, senior vice president for government affairs at the CIAB, noted that the Council has been a "longtime" supporter of an OFC, but declined to go into detail about what he said at the meeting, noting that "it was a private opportunity to have an open dialogue with regulators."

However, Mr. Wood added, "I can say that it was a frank, constructive and gratifying dialogue. There was more focus on what we agree on, such as surplus lines reform and uniform agent/broker licensure, than what we disagree on."

An IIABA official confirmed that Robert Rusbuldt, president and CEO, spoke at the roundtable. "We were invited to speak to the state regulators," the official said. "The roundtable dealt with the big picture concerning insurance regulatory reform and our general perspective on that topic."

Charles Chamness, president and CEO of NAMIC, also confirmed he appeared at the roundtable. He said he urged all states to adopt the Illinois model–that is, no prior approval rate regulation. His other major point, he said, was a call for less of what he and Mr. Sampson called "friction"–that is, different standards and reporting requirements between states.

"If they do those two things, we will go a long way to addressing the types of issues the pro-OFC forces are raising on Capitol Hill," Mr. Chamness said.

But the most pointed comments were by Mr. Sampson, who said he told those attending the roundtable "it is increasingly likely that Congress will intervene in insurance regulation unless it is persuaded that rapid, visible, meaningful regulatory modernization at the state level is occurring."

"I also shared with them that it is PCI's view states are not making sufficient progress to reform the current regulatory system," said Mr. Sampson, who took over as head of PCI after serving as deputy secretary at the U.S. Commerce Department. "I indicated that PCI wanted to work closely with them to help achieve that regulatory reform and modernization."

The heart of his message was that PCI and its members "support responsible reform of the existing system based on sound principles of regulation that preserve the prerogatives of the states."

He noted that he said PCI "recognizes that the depth of experience of the states in regulating the industry is not something that we underestimate, and that such experience would not quickly be replicated at the federal level."

Mr. Chamness also said that in his comments he brought up Florida, which has been critical of insurers for not lowering homeowners rates enough to satisfy state officials–including insurance regulators.

Florida recently suspended the ability of Allstate to write new personal lines business until it turned over hundreds of thousands of pages of documents related to its rate structure, and signed an affidavit promising to produce all documents as they are requested in the future.

"I told them Florida insurance regulation has effectively destroyed the private market, and complimented neighboring coastal states for their restraint, which will ultimately give a benefit to consumers in those states by keeping the private market vibrant and healthy," he said.

Mr. Chamness noted "some positive signs" in modernizing state regulation, citing recent rate reforms in Kansas.

"But states have to do more to commit themselves to change," he said. "We also encouraged the regulators to communicate our concerns to the governors and legislators who ultimately make the decision regarding insurance regulation."