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The Big "I" Opposes Optional Federal Charter Bill

Independent Agents seek modernization and reform of regulatory system via targeted federal legislation

WASHINGTON, D.C., May 24, 2007—The Independent Insurance Agents & Brokers of America (the Big “I”) opposes S.40, the National Insurance Act of 2007 (NIA), introduced today by Sen. John Sununu (R-N.H.) and Sen. Tim Johnson (D-S.D.). 

Rather than creating a massive new federal bureaucracy under an Optional Federal Charter (OFC) bill, the Big I  instead supports targeted federal legislation to reform the state insurance regulatory system, which relies on the over 100 years of skill and experience of states as insurance regulators. An example of such a pragmatic approach is S.929, the Nonadmitted and Reinsurance Reform Act introduced by Sen. Mel Martinez (R-FL) and Sen. Bill Nelson (D-FL), which would help create uniformity in the surplus lines and reinsurance markets. 

“There is no question in the insurance market that the existing regulatory system needs to be reformed,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations. “Change is overdue, and virtually every industry stakeholder agrees the existing system can be slow, inefficient, and duplicative.  The Big “I” agrees with the need to update the regulatory system, but a one-size-fits-all scheme that creates a new federal bureaucracy is not the answer.”

 The Big “I” is among the leaders in advocating reform of state insurance regulation.  Although the need for greater efficiency and uniformity is clear, IIABA believes optional federal chartering, federal regulation and the creation of a new federal bureaucracy go too far.  The Big “I” has many reasons for opposing OFC, including:

 Local insurance regulation works best for consumers and the state system ensures a level of responsiveness to consumers that could not be matched at the federal level. 

  • The dual state/federal system established by the NIA would be confusing to consumers and could create coverage gaps.
  • While addressing some of our members’ licensing concerns, the Big “I” believes the NIA would lead to additional regulatory burdens on agents and brokers and would negatively impact our members’ ability to represent their customers by establishing a distant federal regulator in Washington, D.C.
  •  By eliminating or drastically limiting regulatory review of policy language for the small commercial and personal lines markets, the NIA would leave consumers unprotected. 
  • The dual structure established by the NIA could have disastrous implications for solvency regulation by largely bifurcating this key regulatory function from guaranty fund protection. 
  • The NIA would negatively impact revenue through a loss of licensing fees and could threaten state premium tax revenue – critical funding heavily relied upon by the states for various purposes.

 “OFC would substitute a dual, federal/state patchwork of regulation for the existing state-by-state system, which would heighten, rather than diminish, regulatory burdens on our membership and create confusion for the customers we serve,” says Tom Koonce, Big “I” assistant vice president for government affairs and federal relations. “A new federal regulator located in Washington, D.C. brings a host of new problems to the table, including unresponsiveness to market differences among the states.  The solution to modernizing insurance regulation is to reform the state-based system through targeted federal legislation, not the creation of a cumbersome federal bureaucracy.” 

IIABA advocates for a pragmatic, middle-ground approach that uses targeted federal legislation to improve state insurance regulation by creating a more uniform and streamlined regulatory system. This approach would overcome state-level impediments to reform and build on, rather than dismantle, the states’ inherent strengths—diversity, geographical uniqueness, innovation and responsiveness to consumers—to meet the challenges of a rapidly changing insurance marketplace. 

“Targeted reform of the state-based system such as the Nonadmitted and Reinsurance Reform Act which has been introduced in both the Senate and the House is the appropriate remedy for the marketplace’s problems, and is the only solution that has gained broad industry and bipartisan support,” Symington says.  “In fact, this bill passed the House overwhelmingly last year by an astounding 417-0 vote.   The Big “I” hopes that industry participants will support this approach to much-needed reform that will benefit consumers now, “Symington concluded.  “Clearly, speed to market, agent and company licensing, market freedom and other insurance regulatory concerns can be addressed efficiently and more expeditiously under this approach than under the creation of a new federal bureaucracy.

 Founded in 1896, IIABA (the Big “I”) 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—as well as employee benefit plans and retirement products. Web address:


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