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Gramm-Leach-Bliley Act Points to Functional, State-Based Insurance Regulation


Nation’s largest insurance association says legislation reaffirmed state authority and lays groundwork for needed future reform


WASHINGTON, D.C., July 13 - The Independent Insurance Agents & Brokers of America (the Big “I”) today testified before the Senate Banking Committee that the landmark 1999 Gramm-Leach-Bliley Act (GLBA) has not fundamentally altered the insurance landscape for consumers, and that it clearly points to state-based regulation of insurance.


Ronald Tubertini, CIC, president and CEO of Jackson, Miss.-based SouthGroup Insurance and Financial Services and chairman of the Big “I” Government Affairs Committee, testified before the Senate panel on the impact GLBA has had on the insurance industry. He noted that the GLBA reaffirmed state authority in insurance regulation, even when insurance is sold by banks or other entities, and had led to substantial reform in multi-state agent licensing as a result of the legislation’s National Association of Registered Agents and Brokers (NARAB) subtitle.


Tubertini, the only insurance industry representative to testify, also noted that consolidation within the insurance marketplace that started in the 1990s has continued and perhaps increased, but mega-mergers of financial services providers that had been predicted before the law was enacted generally have not occurred.


In his remarks, Tubertini told Senate Banking Committee members that the focus on “functional regulation” was perhaps the GLBA’s most important accomplishment from the perspective of the Big “I.”


The concept of functional regulation provides that insurance regulators oversee the business of insurance, banking regulators oversee banking activity, and securities regulators oversee securities activity regardless of the type of entity engaged in the activity. With the move toward banks becoming involved in the sale of insurance, this is an important distinction that strongly defines which regulator should oversee which industries and mandates that individuals can engage in the insurance business only if licensed by the appropriate state insurance regulator.


“Since GLBA codified this important principle, the focus has largely shifted to the success of functional regulation in the insurance marketplace and the effectiveness and efficiency of state insurance regulation,” Tubertini testified. “The discussion has taken on more urgency as the perceived need for regulatory reform has increased due to the emergence of a more global financial services industry.”


Tubertini noted that the NARAB approach of targeted reforms is consistent with the approach recently articulated by the leadership of the House Financial Services Committee. That panel’s chairman, Rep. Mike Oxley (R-Ohio), worked with the chairman of the panel’s Insurance Subcommittee, Rep. Richard Baker (R-La.), to develop and propose the so-called “Oxley-Baker Road Map,” which calls for preserving and reforming the state-based insurance regulatory system, while facilitating federal standards for issues such as reciprocity in licensing. The Big “I,” which has advocated a similar middle-ground approach for more than two years, strongly supports the Oxley-Baker proposal.


In his testimony, Tubertini acknowledged that the current insurance oversight system does have its shortcomings, particularly referencing two primary categories—the length of time it takes to get a new insurance product to market, and unnecessary duplicative oversight in the licensing and post-licensure auditing process. He articulated the Big “I” position, which is that both of these issues could be handled by need-specific legislation without creating a cumbersome and costly federal insurance bureaucracy.


“IIABA believes the best alternative for addressing the current deficiencies in the state-based regulatory system is a pragmatic, middle-ground approach that uses federal legislative tools to foster a more uniform system and to streamline the regulatory oversight process at the state level,” Tubertini told the lawmakers. “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 state-based system and, in the process, promote a more efficient and effective regulatory framework.”


Tubertini told the committee that by using this approach the work of Congress on the regulation issue could proceed without jeopardizing or undermining the knowledge, skills and experience that state regulators have developed over a period of decades to the benefit of consumers nationwide.


“While the Big ‘I’ believes such a proposal must modernize those areas where existing requirements or procedures are outdated, it is important to ensure that this is done without displacing the components of the current system that work well. In this way, we can assure that insurance regulation will continue to be grounded on the proven expertise of state regulators at the local level,” Tubertini testified.


Tubertini added that the enactment of targeted federal legislation to address certain problems with state regulation is not a radical concept. “The Senate Banking Committee and the House Financial Services Committee already have proven that this approach can work with the NARAB provisions of GLBA. The Big ‘I’ believes the NARAB model can serve as a template for further reform of state insurance regulation.”


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:



​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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