WASHINGTON, D.C., Oct. 3, 2007— The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), the nation’s largest insurance association, testified today before a hearing of the House Committee on Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises on insurance regulatory reform.
Alex Soto, CPCU, ARM, president of Miami, Fla.-based InSource, Inc., and Immediate Past Chairman of the Board of IIABA, testified on the importance of insurance regulatory reform. On behalf of the Big “I”, he thanked Chairman Paul Kanjorski (D-Pa.) and Ranking Member Deborah Pryce (R-Oh.) for holding a hearing on this important issue.
Soto expressed the Big “I”’s support for the state system of insurance regulation but acknowledged that there are inefficiencies today in the regulation of insurance. He stated that the system needs to be modernized and that reform should be accomplished through targeted federal legislation.
“As we have for over 100 years, IIABA supports state regulation of insurance – for all participants and for all activities in the marketplace – and we oppose federal regulation, optional or otherwise,” said Soto. “Yet despite this historic and longstanding support of state regulation, we do not believe the state system can effectively address its problems on its own. “
Soto outlined IIABA’s ideas on how federal legislative action could reform the state regulatory system, and how two overarching principles should guide such efforts. First, Congress should attempt to fix only those components of the state system that are broken. Second, no action should be taken that in any way jeopardizes the protection of the insurance consumer, which is the fundamental objective of insurance regulation and of paramount importance to IIABA and its members.
“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 marketplace,” said Soto. “This can be accomplished through enactment of a number of bills dealing with particular aspects of insurance regulation starting with those areas in most need of reform where bipartisan consensus can be established.”
Soto pointed out that such targeted legislation has already passed the House of Representatives, referring to H.R. 1065, the Nonadmitted and Reinsurance Reform Act of 2007, introduced by Reps. Dennis Moore (D-Kan.) and Ginny Brown-Waite (R-Fla). He stated that this model, federal legislation modernizing state regulation, can be used to reform other aspects of the insurance market. Soto specifically mentioned that problems independent agents and brokers face in the licensing process could be addressed through targeted federal legislation.
“The current licensing system is cumbersome, confusing, burdensome, and time-consuming, and it hinders the ability of agents and brokers to responsively address the needs of insurance purchasers,” said Soto. “Targeted federal legislation that would ensure a completely reciprocal and/or uniform licensing process for agents would provide a more competitive insurance market and improve the state-based system of insurance.”
Finally, Soto reiterated the Big “I”’s strong opposition to optional federal charter proposals. He stated that creating an optional federal regulator is at odds with one of the primary goals of insurance regulation, which is consumer protection.
“Currently, when my customers are having difficulties with claims or policies, it is very easy for me to contact a local official within the state insurance department to remedy any problems,” said Soto. “If insurance regulation is shifted to the federal government, I would not be as effective in protecting my consumers. I have serious reservations that a federal bureaucrat will be as responsive to a consumer’s needs as a local regulator.”
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: www.independentagent.com.