WASHINGTON, D.C., July 16—The Independent Insurance Agents & Brokers of America (IIABA) is strenuously opposing recently introduced Senate legislation that would establish onerous, full-blown federal regulation for insurance, says Association CEO Robert A. Rusbuldt.
South Carolina Sen. Ernest “Fritz” Hollings (D) introduced the Insurance Consumer Protection Act (S. 1373) late last week. Among other things, the bill would establish a five-person Federal Insurance Corporation, an independent commission within the Commerce Department that would regulate all interstate lines of insurance except workers comp and state residual workers comp pools. Also exempted would be single-state insurers that do business only in their state of domicile.
If enacted, S. 1373 would preempt the insurance industry’s limited antitrust exemption granted under the McCarran-Ferguson Act and give the Commission the ability to “investigate the organization, business, conduct, practices and management of any person, partnership, or corporation in the insurance industry,” presumably including independent agents and brokers.
“IIABA has been steadfast and consistent with its message that the state regulatory system needs to be streamlined and modernized—not destroyed. The Hollings proposal is radical; it will not work in the real world marketplace, and it will prove to be onerous for consumers,” explains Rusbuldt. “It is our opinion that Sen. Hollings’ Insurance Consumer Protection Act would not work as intended. There are many questions regarding the guarantee fund system, which is paramount for consumer protection, and by moving insurance regulation to Washington it leaves the states and their regulatory apparatus in a precarious state for those forced to stay in the state system. There are more than 10,000 people in the state insurance departments regulating the business of insurance. The Commerce Department will probably need even more people than that to regulate the business.
“Force feeding this approach on the industry will make insurance regulation less responsive to the needs of consumers. Instead of casting aside more than 150 years of state work and experience, the Big ‘I’ believes Congress should be looking at ways to improve, reform and modernize state regulation. As such, IIABA’s 300,000 members are staunchly opposed to the Hollings bill,” says Rusbuldt.
IIABA Sr. Vice President of Federal Government Affairs Maria Berthoud says: “IIABA’s middle-ground reform proposal on insurance regulation reform, which has garnered the attention of key regulators, congressional leaders and industry leaders, is a more realistic and politically viable approach. The plan, advocated by the Big ‘I’ and others, uses ‘federal tools’—standards, national reciprocity or multi-state uniformity, incentives or a carrot-and-stick approach—to achieve the targeted reforms necessary to streamline state insurance regulation. By addressing reform in this method, the Big ‘I’ believes that greater uniformity, efficiency and responsiveness in the state-based system will be created and elimination of unnecessary or inconsistent regulatory requirements can be accomplished.
“The plan advocated by the Big ‘I’ will implement necessary reforms to make the state system more consumer friendly, efficient for insurance companies as well as independent agents and brokers, and more responsive to marketplace dynamics to include the introduction of new products,” says Berthoud. “Our reform blueprint is a more pragmatic course for modernizing the state insurance regulatory system. It specifically targets areas that need the attention of policymakers and sets out a sensible and politically achievable road map for reform.
“The advantage of the IIABA approach is that it offers the best of all worlds. It will promote the establishment of more uniform standards and streamlined procedures from state to state, protect consumers while enhancing marketplace responsiveness, and emphasize that the primary goals of insurance regulation can best be met by improving the state-based system,” asserts Berthoud.
“We believe that this tailored, pragmatic approach is doable from a political perspective on Capitol Hill, and since it would reform the current system without reinventing the wheel or creating an unresponsive federal bureaucracy, it holds more of an attraction to many rather than the radical proposal introduced by Sen. Hollings,” says Berthoud.
Rusbuldt concluded that IIABA will work for reform by educating members of the Senate and the House on the intricacies of the state insurance regulation issues.
“There are areas that must be reformed, modernized or made uniform, and we want reform for our members and insurance consumers sooner rather than later. But the federal government doesn’t have all the answers. That was proven by the savings and loan regulatory debacle,” says Rusbuldt.
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, health, employee benefit plans and retirement products. Web address: www.independentagent.com.