Three Insurance Reform Bills Clear Subcommittee; Full House Vote Looms

HR 5840–which would create a federal Office of Insurance Information in the Treasury Department to advise the executive branch on regulatory issues–was introduced by the subcommittee's chair, Rep. Paul Kanjorski, D-Pa., who noted that it "promoted an idea I have long held–that the federal government should have an in-house expert on insurance issues."

Rep. Kanjorski offered an amendment making changes designed to assuage the concerns voiced by some critics of the bill.

The bill–which already provides a seat on the OII's advisory board for the National Association of Insurance Commissioners–was amended to create a specific advisory role for the National Conference of Insurance Legislators as well.

In addition, language giving the OII authority to preempt state laws was clarified to apply only under "very narrow circumstances and with a very detailed procedure," said Rep. Kanjorski.

Rep. Chris Shays, R-Conn., said the bill struck a "careful balance" between those who believe in federal oversight and those who would keep regulation of the insurance industry solely in state hands.

In touching on the issues of state-versus-federal regulation, the bill drew a mixed reaction from industry groups.

Marc Racicot, president of the American Insurance Association and a former governor of Montana, said the panel's approval "is a recognition that an immediate need exists for federal expertise regarding the important national and international insurance trends in today's rapidly changing and globalized marketplace."

However, David Sampson, president of the Property Casualty Insurers Association of America, expressed concern regarding the preemption authority OII would have, although he noted that PCI has not taken a formal position for or against the bill.

"We advocate that any preemption of state laws, if necessary, be accomplished by legislative action and not simply left to be developed through an administrative procedure," Mr. Sampson said.

"The legislative process is the most appropriate way of answering public policy questions–such as how to harmonize this proposal with existing laws like the McCarran-Ferguson Act," he added.

The second bill approved–which revived the NARAB concept for ensuring reciprocal recognition of agent licensing among the states, originally included in the Gramm-Leach-Bliley Act nearly a decade ago–was introduced by Rep. David Scott, D-Ga., and Geoff Davis, R-Ky.

Both noted that it had drawn significant support from both Democrats and Republicans, as well as backing from state insurance regulators and agent groups.

Rep. Scott noted that the bill had been changed to give state regulators a majority–albeit a slim one–on the board tasked with overseeing NARAB, and also said language was clarified to ensure that state revenues from licensing fees would not be reduced.

Rep. Davis said his experience showed the need for the legislation, when as a small-business owner he tried to find a single policy covering several employees across multiple states. "Nearly 10 years after Gramm-Leach-Bliley, we're still in need of progress on this issue," he said.

Rep. Jackie Speier, D-Calif., voiced some concern regarding the bill, arguing that nonresident producers "are not going to be prepared" for her state's system of consumer protection without being required to study it and be tested beforehand."

Agents groups have supported the measure, and Rep. Kanjorski praised their coming together with regulators to help craft the legislation.

Robert Rusbuldt, president and CEO of the Independent Insurance Agents and Brokers of America, said the NARAB bill was an example of how "targeted reforms" could effectively resolve problems facing the insurance marketplace.

"The most serious regulatory challenges facing our members are the redundant, costly and contradictory requirements that arise when they seek licenses on a multistate basis," he said. "The NARAB Reform Act solves these problems through targeted reform and modernization of nonresident agent and broker licensing without affecting resident licensing."

The Council of Insurance Agents and Brokers–which came up with and backed the NARAB concept years before its inclusion in the GLB Act–offered its support for the bill in a letter to committee members signed by the group's leadership.

"When the original NARAB was enacted as a part of Gramm-Leach-Bliley in 2000, the first important steps were implemented to achieve some semblance of reciprocity among varying states," the CIAB said in its letter. "But the pace of interstate transactions has far outstripped the pace of reform, and we now need the full implementation of an interstate agent/broker licensing clearinghouse with high standards of professionalism for producers, which will better serve the needs of consumers and ultimately lower the costs of insurance."

In addition, the panel gave its approval to H.R. 5792, which would expand the Liability Risk Retention Act to allow risk retention groups to offer commercial property coverage. RRGs are currently limited to providing liability coverage.

Rep. Dennis Moore., D-Kan., who introduced the bill, said it would have a "modest but important effect on increasing capacity" for catastrophe-prone or otherwise hard-to-place property exposures.

In a major addition, a new provision was added that would require the Government Accountability Office to examine whether there is unlawful interference in the operation of RRGs by regulators from states outside the state where they are based.

Dick Goff, president of the Self-Insurance Institute of America, praised the addition, saying the "single regulator" structure envisioned under the original legislation has been compromised by the states. "These actions have obviously had a negative impact within the RRG marketplace," he said.

RIMS also cited its support for HR 5840 and HR 5792, saying the bills would "better facilitate access to affordable insurance for commercial consumers," and declaring both bills "legislative priorities for insurance buyers and risk managers."

However, the National Association of Mutual Insurance Companies expressed some concerns that H.R. 5792 could allow too great an expansion of RRGs, creating what it sees as an unfair competitive environment.

"Admitted carriers are subject to the myriad of state regulations," said Jimi Grande, NAMIC's vice president of government and political affairs. "Allowing RRGs, which enjoy a lesser degree of regulation, to provide additional coverages that are readily available in the marketplace would provide a competitive advantage over traditional, conventionally formed insurers."

The three bills passed by the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, now "fast-tracked to go to the floor of the House," according to RIMS, are:

o H.R. 5840: The Insurance Information Act, which would create a federal Office of Insurance Information in the Treasury Department.

o H.R. 5792: The Increasing Insurance Coverage Options for Consumers Act, which would expand the Liability Risk Retention Act to allow risk retention groups to offer commercial property coverage.

o H.R. 5611: The National Association of Registered Agents and Brokers Reform Act, which would establish a national producer licensing clearinghouse.