BIG “I” TESTIFIES BEFORE SENATE COMMITTEE ON REGULATION
Voices support for Oxley-Baker proposal, points to GLBA as basis for state authority
WASHINGTON, D.C., September 22—The Independent Insurance Agents & Brokers of America (the Big “I”) used today’s Senate Banking Committee hearing to strongly endorse enactment of “targeted” congressional legislation to affect reform and modernization of the state-based insurance regulatory system.
The Big “I” noted the real need for insurance regulatory reform in a common-sense and pragmatic fashion. In July, the Big “I” was the only insurance trade association to testify before the same panel on the effect the Gramm-Leach-Bliley Act (GLBA) has had on the insurance marketplace.
Today, Thomas B. Ahart, CPCU, AAI, president of Phillipsburg, N.J.-based Ahart, Frinzi & Smith Insurance Agency and an IIABA past president, testified on behalf of the Big “I.” He voiced the Association’s strong support for a pragmatic, middle-ground approach that streamlines the regulatory oversight process and fosters uniformity without supplanting state oversight.
In his testimony, Ahart said that two overarching principles should guide congressional action to reform the existing system. First, Congress should only change components of the existing system that need to be fixed—not overhaul the entire system on a “one-size-fits-all” basis. Second, no actions should be taken that would jeopardize the protection of insurance consumers.
“By using targeted and limited federal legislation to overcome the structural impediments to reform at the state level, we can improve rather than replace the current state-based system and, in the process, promote a more efficient regulatory framework,” Ahart said. “Rather than employ a one-size-fits-all regulatory approach, a variety of legislative tools could be employed on an issue-by-issue basis to take into account the realities of today’s global marketplace.”
Ahart noted that Congress can fix existing problems with agent and company licensing, product reviews and market conduct oversight without jeopardizing or undermining the knowledge, skills and experience that state regulators have developed over decades. He also strongly opposed the concept of “optional” federal chartering, citing numerous deficiencies with the proposal. Such a new system, Ahart said, would be rife with problems that would negatively impact the ability of independent insurance agents and brokers to serve consumers and it would leave some gaping regulatory holes.
“Currently, when my customers are having difficulties with claims or policies, it is very easy for me to contact my local company representative or a local official within the state insurance department to remedy any problems,” Ahart said. “If insurance regulation is shifted to the federal government, I would not be as effective in protecting my consumers, because I have serious reservations that some federal bureaucrat on a 1-800 number will be as responsive to a consumer’s claim problems or other complaints in my local county.”
Additionally, Ahart said that the so-called industry “consensus” federal charter proposal would force the state guaranty funds to accept and backstop federally chartered insurers—and noted that there is nothing “optional” about that. Ahart added: “This would be an unprecedented intrusion on state solvency regulation. In the end, the state system would be responsible for insolvent insurers but could not regulate them to keep them from going insolvent.”
Ahart also endorsed the National Association of Registered Agents and Brokers (NARAB) provisions within the Gramm-Leach-Bliley Act (GLBA) as a template for congressional action. He noted that at least 48 states have passed licensing reform legislation since GLBA was enacted, and that more than 40 jurisdictions have been formally certified as meeting the NARAB mandates, although 100-percent compliance is definitely needed.
“This (middle-ground approach) preserves and builds upon the expertise of state regulation and leaves in place the substantial regulatory force that now protects consumer interests and insurer solvency at the state level,” Ahart said. “It is the least intrusive option, which unlike ‘optional’ federal chartering, does not threaten to remove a substantial portion of the insurance industry from state supervision and risk the creation of an unlevel playing field.”
The Big “I” consistently has eschewed creation of a new federal bureaucracy in favor of reforms that would streamline the current regulatory system through creation of national standards and licensing reciprocity. The Association strongly supports the State Modernization and Regulatory Transparency (SMART) Act, currently being discussed in the House of Representatives, which would provide targeted federal reforms without undermining the state-based system. The SMART Act is the legislative culmination of the “road map” proposed in March by House Financial Services Committee Chairman Michael Oxley (R-Ohio) and Rep. Richard Baker (R-La.), chairman of that committee’s Insurance Subcommittee.
Founded in 1896, IIABA is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life and health—employee benefit plans and retirement products. Web address: www.independentagent.com.