Optional Federal Charter Bill Reintroduced in Congress

In early April, Rep. Melissa Bean (D-Ill.) and Rep. Ed Royce (R-Calif.) reintroduced their perennial optional federal charter (OFC) legislation, H.R. 1880, in the U.S. House of Representatives under the captivating but misleading title, The National Insurance Consumer Protection Act.

Although the marketplace and political landscape have changed significantly since it was last introduced, this OFC bill is surprisingly similar to previous versions of federal charter legislation. It has been slightly modified and now features a new section on systemic risk, but the optional nature of the proposed legislation and the bill’s fundamentals remain unchanged. The latest proposal merely establishes a skeleton framework, and gives considerable discretion to a proposed new federal insurance commissioner, other federal appointees and bureaucrats who would be empowered to develop the details, standards and specific requirements. The recycled bill also immediately establishes a federal guaranty fund for all national insurers, even though consumers are already protected under the established state guaranty fund system.

Contrary to the bill’s supposed focus on consumers, the Big “I” believes that, just like past OFC bills, this legislation would damage the stable and healthy insurance marketplace to the detriment of agents and policyholders. This bill deregulates several areas that are currently overseen at the state level and sets up a system to allow regulated entities to pick and choose their regulator. In an OFC world, consumers would be left vulnerable and the insurance market would be exposed to the same types of problems experienced by other sectors of the financial services industry where entities can choose the regulators that suit them best.

The Big “I” continues to support modernization of insurance regulation through targeted federal legislation. The association also strongly opposes proposals that would result in day-to-day regulation and micro-managing of a stable industry by the federal government. A targeted 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 today’s financial services industry and a rapidly changing insurance marketplace.

As the stability of the property-casualty insurance market clearly demonstrates, state regulators are doing their job of monitoring U.S. insurance entities for potential financial trouble by using a variety of tools to navigate the choppy financial market waters.

State regulators already use a proven and effective safety net through state guaranty funds to protect consumers in the rare case of insurer insolvency. Despite efforts to turn the American International Group (AIG) case into a “guilty by association” situation, the problems of the conglomerate actually proved how effective state commissioners are in regulating the insurance market, especially when it comes to solvency.

The Big “I” has historically opposed measures such as OFC, but the past few months have made it even more evident that the solution is not to displace effective state regulation with deregulation and an unproven regime harmful to consumers and the market. Consumers, Main Street businesses and congressional leaders must continue to oppose this legislation that would exacerbate problems in the financial services sector and in the economy. It’s counter-productive to fix something that isn’t broken, especially when other sectors of the financial services industry are in crisis and the economy is fragile. The Big “I” strongly believes that Congress should recognize that state insurance regulators have done an excellent job in keeping the p-c insurance market stable and should only consider targeted reforms of the state regulatory system that would make it more uniform and efficient.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.


Big “I” Grassroots Leader Program Continues to Grow

The Big “I” Grassroots Leader Program is a campaign that promotes Big “I” grassroots programs, the association’s political action committee, InsurPac, and attendance at the annual Big “I” Legislative Conference & Convention.

Agents are named grassroots leaders when they have attended the Big “I” Legislative Conference for two or more consecutive years, have contributed at least $250 to InsurPac during the year and have answered the call to legislative action alerts.

At press time, 248 individuals had qualified for the Grassroots Leaders Award and many others are very close.

Agents who achieve these benchmarks are distinguished with a special pin, recognizing their political activism on behalf of the association. Grassroots leaders are encouraged to wear their pins at the Big “I” Legislative Conference &Convention, at their state lobbying days, during state board meetings and at all other relevant events.

The goals of the Grassroots Leader Program are to increase attendance at the Big “I” Legislative Conference & Convention; increase contributions to InsurPac; and increase agents’ responses to grassroots action alerts.

-M.T.