Agent Groups Split Over New OFC Bill

News that two members of Congress will introduce legislation proposing optional federal chartering of insurers has drawn a split reaction from different insurance agent trade groups.

The National Association of Professional Insurance Agents is charging that the measure is a call for greater deregulation, not reform, and threatens “to dismantle the successful state insurance regulatory system.”

But a spokesman for Agents for Change, which represents both property-casualty and life insurance agents who support federal regulation, is lauding the bill, saying it is forcing opponents of federal regulation to “scramble.”

Peter Ludgin, executive director of Agents for Change, said the current state regulatory system worked well in the “19th century.”

He said opponents of federal regulation are using “their same old, tired talking points, developed years ago,” and “are not adding anything constructive to a real policy debate in light of the current crisis.”

He added, “Interest groups who think the insurance regulatory system should not be reformed to reflect the needs of 21st century consumers are missing the mark.”

Both the PIA and Agents for Change are talking about the “National Insurance Consumer Protection and Regulatory Modernization Act” which Reps. Mellisa Bean, D-Ill., and Ed Royce, R-Calif., said they would introduce shortly.

The bill would establish a national system of regulation and supervision for nationally registered insurers, agencies and producers. States would still maintain responsibility for regulating state-licensed insurers, agencies and producers.

Kenneth Auerbach, national president of the PIA, charged that “this bill is just more of the same.”

Mr. Auerbach said it is just adding “perfume and lipstick” to a “tired, old proposal that its backers have tried and failed to advance for many years.”

“It is still a bad idea,” he said.

Mr. Auerbach concedes that there are two different provisions to OFC legislation in the latest bill. One new element in this year's version of the bill is that it “takes affirmative steps to begin to dismantle the state insurance regulatory system” by “providing authorization for the formation of a separate guaranty fund for federally regulated insurers.”

It also calls for establishing federal insurance offices in all 50 states, he noted.

“Congress and the administration cannot afford to take their collective eyes off the ball with a bill like this,” Mr. Auerbach said. Congress' focus “must remain on correcting the failures in the federal regulatory system that led to our current financial crisis.”

“Deregulating insurance does not accomplish this task,” Mr. Auerbach said.

But Mr. Ludgin of Agents for Change said opponents of the legislation are wrong for “criticizing legislators for moving this debate forward.”

He said such rhetoric “is counterproductive to our shared goal of more efficient and effective regulation.”

Mr. Ludgin also said that “insurance regulation reform will happen; this train is pulling out of the station.”