The Independent Insurance Agents & Brokers of America (the Big “I”) testified today before the Senate Banking Committee in support of targeted “federal tools,” and in opposition to federal regulation, to enhance and reform the existing state-based insurance regulatory system.
Thomas Minkler, president of Keene, N.H.-based Clark-Mortenson Agency, chairman of the Big “I” national Government Affairs Committee and an independent agent, expressed the longstanding Big “I” support for regulatory reform that retains the strengths of the current system and uses federal legislation, not federal regulation, to improve agent and company licensing, “speed-to-market” of insurance products, and more.
Minkler also stated the association’s strong opposition to S. 2509, the National Insurance Act of 2006, introduced by Sens. John Sununu R-N.H. and Tim Johnson D-S.D., which would establish an “optional federal charter” (OFC) and effectively create a dual-regulatory system.
“It is clear that there are inefficiencies existing today with insurance regulation, and there is little doubt that the current state-based regulatory system should be reformed and modernized,” Minkler said. “At the same time, however, the current system does have strengths—particularly in the area of consumer protection.”
Minkler testified that the Big “I” had supported state-based regulation for more than 100 years, but expressed a lack of confidence that the current system would be able to solve its existing problems of inefficiency and “speed to market” without Congress creating “federal tools” to help establish uniform guidelines. He stressed, however, that any federal legislation should be limited and should not establish full-blown federal regulation.
“We feel that there is a vital legislative role for Congress to play in helping to reform the insurance regulatory system,” Minkler said. “However, such an effort need not replace or duplicate at the federal level what is already in place.”
To that end, Minkler advocated a targeted system of federal legislation along the lines of the National Association of Registered Agents & Brokers (NARAB) provisions of the Gramm-Leach-Bliley Act (GLBA).
“There is no doubt that only Congress can bring about the uniformity that is sorely needed in our regulatory system. We have precedent for Congressional action in a host of insurance areas—terrorism insurance, crop insurance, flood insurance, and more—but Congress has always acted to address and rectify specific insurance problems, rather than replicating or replacing the current regulatory system,” said Minkler.
“Most observers agree that state regulation has worked effectively to protect consumers, largely because state officials are positioned to be responsive to the needs of the local marketplace and local consumers,” Minkler testified. “In 2002, state insurance regulators handled approximately 4.2 million inquiries and complaints. Today, state insurance departments employ approximately 13,000 individuals who draw on over a century-and-a-half of regulatory experience to protect insurance consumers.”
Minkler also noted that, unlike banking and securities, insurance policies are inexorably bound to the separate legal systems of each state, and that policies are contracts written and interpreted under the laws of each state. As such, a federal solution as has been employed for banking and securities would not work for insurance.
Additionally, Minkler emphasized the fact that the existing state regulators are closer to consumers than a federal bureaucracy would be, a key reason why S. 2509 is not an ideal solution to existing issues about insurance regulation.
“As insurance agents and brokers, we serve on the front lines and deal with our customers on a face-to-face basis,” Minkler said. “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. If insurance regulation is shifted to the federal government, I would not be as effective in protecting my consumers, as I have serious reservations that a federal bureaucrat on a 1-800 number will be as responsive to a consumer’s needs as a local regulator.”
IIABA identifies itself as 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.
Source: Independent Agents & Brokers of America (Big I)
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