Most Insurance Lines Would Be Exempt From Consumer Protection Agency Rules

Washington

Insurance products would be mostly exempt from oversight by the proposed U.S. Consumer Financial Protection Agency under legislation submitted to Congress last week by the Treasury Department.

Under the proposed measure, "the business of insurance" would be exempt from oversight by the new agency except for credit, mortgage and title insurance.

Cliston Brown, director of federal public affairs at the Property Casualty Insurers Association of America, said his group was "pleased" by the specifics of the new bill.

"The property and casualty industry offers the strongest consumer protections of all financial services sectors and does not need additional consumer products regulation," he said.

Specifically, under the legislation, personal lines products, life insurance, annuities, disability income insurance and long-term care insurance would be exempt from oversight.

However, officials at the Association for Advanced Life Underwriting cited one "question/concern" about the proposed legislation–specifically, the implications for agents of including "financial advisors" under the new agency's purview.

The proposed bill would split off consumer protection of financial products from existing federal agencies. The new five-member agency would "promote transparency, simplicity, fairness, accountability and access in the market for consumer financial products and services."

According to recent testimony, the new agency will primarily rely on state consumer protection agencies and attorneys general to carry out its enforcement activities.

SURPLUS LINES

In other Washington developments, legislation streamlining and reforming state regulation of surplus lines insurance and reinsurance was introduced in the Senate, creating a uniform regulatory system while preserving the role of the state regulator.

The bill has broad, bipartisan support from both the industry and members of Congress. Companion legislation is likely to pass the House under expedited procedures within the next month.

The legislation–S. 1363–was co-sponsored by Florida Senators Bill Nelson (a Democrat) and Mel Martinez (a Republican), as well as Sen. Evan Bayh, D-Ind., and Sen. Mike Crapo, R-Idaho.

From the buyers' perspective, the Risk and Insurance Management Society voiced strong support for the measure to the U.S. Senate. "RIMS believes the Non-Admitted and Reinsurance Reform Act of 2009 would make insurance more available and affordable by reducing insurers' regulatory costs that are passed on to consumers," said Deborah M. Luthi, a member of the RIMS board and director of enterprise risk management services at Matheson.

"RIMS is pleased the Senate version now incorporates the RIMS-approved definition of a 'qualified risk manager'" in determining eligibility under the new regulatory regime. "RIMS urges the Senate to pass this legislation as soon as possible," she added.

Joel Wood, senior vice president for legislative affairs at the Council of Insurance Agents and Brokers, said that "having the bill in the hopper in the Senate gets us back to the position we were in last year–before the financial meltdown sucked all the oxygen out of the Senate Banking Committee–and we're obviously extremely grateful for the support of these four members of the Senate, all respected members of the Banking Committee."

John Wood, president of the National Association of Professional Surplus Lines Offices, said the bill would "help consumers by making property and liability insurance more readily available and improving the efficiency of the surplus lines insurance market."

Kurt Bingeman, co-chair of the governmental affairs committee at the American Association of Managing General Agents, added that "as business and personal interests in the U.S. have expanded beyond single-state lines, insurance producers and their clients require clear and non-conflicting guidance in order to transact quickly and with assurances they have complied with the appropriate rules and can efficiently meet their tax liabilities." He called the bill a "critical step" in meeting this goal.

NAPSLO Executive Director Richard Bouhan said enactment of the bill would simplify the tax remittance and compliance responsibilities surplus lines brokers must discharge, and also "bring efficiency and cost reduction of regulatory compliance in placements with multistate exposures."

The reforms contained in the legislation "would benefit not only the brokers and underwriters who provide surplus lines insurance, but also consumers who ultimately pay the price for the inefficiencies," Mr. Bouhan said.

HOUSE ACTION

A bill modernizing and reforming regulation of surplus lines and reinsurance, as well as another streamlining nonresident insurance agent and broker licensing, could be acted on by the full House this month, according to industry officials.

The bills–the Non-Admitted and Reinsurance Reform Act of 2009 (H.R. 2571) and the National Association of Registered Agents and Brokers Reform Act (H.R. 2554)–were introduced in May. Both could be dealt with under expedited procedures on the House floor as early as the week of July 6, when Congress returns to work from its brief Independence Day recess, according to some industry lobbyists.

But others are more cautious, saying action is more likely to take place sometime later in July.

According to Washington officials of insurance groups with interest in the bills, the two ranking members of the House Financial Services Committee–Rep. Barney Frank, D-Mass., the committee chair, and Rep. Paul Kanjorski, D-Pa., chair of the panel's key Capital Markets Subcommittee–have agreed to allow the bills to proceed to the floor without the need for committee action.

The reason the bills are being allowed to bypass committee is that they are the same as bills passed by the full House last September, and because they have broad, bipartisan support, the lobbyists said.

CIAB's Mr. Wood cautioned that nothing is a given on Capitol Hill, but added, "It's just that we feel good that House [Financial Services Committee] leaders have been supportive once again of moving the surplus lines legislation."

"Were it not for the financial meltdown, we were in a pretty good position to see the bill through to enactment last year, but understandably we couldn't get the requisite oxygen in that environment," he said.

The NARAB measure would create a national mechanism to streamline nonresident insurance agent and broker licensing. There is no companion legislation in the Senate for the NARAB bill.

The measure preserves state insurance regulation and consumer protection provisions, but would require agents applying for membership to submit to a criminal background check. Currently only 17 states require federal criminal background checks for producers.

The NARAB II legislation–introduced by Rep. David Scott, D-Ga., and Rep. Randy Neugebauer, R-Texas–would be "a strong step forward in dealing with the problem of overlapping nonresident agent licensing requirements," according to Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America.