OFC Battle Heats Up

The warmth of summer has come to the nation’s capital, and with it comes an increasingly heated debate in Congress. Now boiling on the front burner is a crucial issue for all independent insurance agents and brokers: insurance regulation.

This spring, Sen. John Sununu (R-N.H.) and Sen. Tim Johnson (D-S.D.) introduced S. 2509, the National Insurance Act. The bill, which the Big “I” opposes, would create an optional federal charter (OFC) system allowing insurers to accept continued state regulation or to select a federal regulator.

In the House, Financial Services Committee Chairman Michael Oxley (R-Ohio) has been adamant that no federal regulation bill will come to the floor on his watch. However, pro-OFC forces expect to introduce a bill in the House later this year. It remains unclear whether it would be an OFC for “life-only” bill, or would cover property-casualty insurance as well.

Chairman Oxley, who the Big “I” recently honored for his diligent work on insurance issues, remains committed to supporting a middle-ground approach. He and his colleague, Subcommittee Chairman Richard Baker (R-La.), have been working on a federal standards approach, which would bring uniformity and efficiency to the state regulatory system without a new federal bureaucracy.

The Big “I” has consistently and wholeheartedly supported the federal tools approach and hopes such legislation will be introduced this summer.

“There is no question in the insurance marketplace that the existing regulatory system needs comprehensive reform,” says Big “I” CEO Robert A. Rusbuldt. “Change is long overdue, and virtually every industry stakeholder agrees the existing system is a slow, inefficient patchwork of differing laws and regulations. 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” has been fully engaged on the Sununu- Johnson bill since its April introduction. The Capitol Hill staff has met with numerous members of Congress and their staffs to educate them on the perils and pitfalls of federal regulation. The association’s media efforts in the national and trade presses have backed these efforts. The Wall Street Journal identified the Big “I” as the chief group leading the charge against OFC, and contrasted our 300,000 members with the anemic membership of a new group called “Agents for Change,” formed and bankrolled by big-company OFC supporters. The Wall Street Journal also noted the soaring financial strength of InsurPac.

Clearly, the efforts against federal regulation are paying dividends. The Big “I” will continue to advocate for the introduction of the federal standards legislation because it is sound policy and because it provides a workable alternative to federal regulation.

That’s where independent agents and brokers across America play an important role. As effective as the Big “I” government affairs team is, the fact that we have 300,000 members involved in their communities from coast to coast packs a grassroots punch that few can counter. Keep the heat on! Contact your elected officials and express your support for targeted federal legislation and your opposition to federal regulation.

And don’t forget the approaching election. Now is a great time to make sure elected officials remember you—by supporting the candidates of your choice. Candidates pay attention to their voters, their supporters and their volunteers. Get active! I

Cliston Brown (cliston.brown@iiaba.net) is Big “I” director of public affairs/media relations.

OFC a Non-Starter for Agents & Brokers

An OFC would be problematic for independent agents. Here’s why:

• Local insurance regulation is better for consumers, and the state-based system ensures a level of responsiveness that the federal level cannot match.

• Establishing a dual state/federal system would confuse consumers who may have some insurance products regulated at the state level and others at the federal level.

• Federal regulation would lead to additional regulatory burdens on many agents and brokers and would negatively impact Big “I” members’ ability to represent their customers.

• The dual structure established by an OFC would complicate solvency regulation, which ensures that companies meet their obligations to consumers.

• Federal regulation could eventually threaten state premium tax revenue, critical funding the states rely heavily upon for various purposes.

• Federal regulation would create an unnecessary federal bureaucracy.

• Federal regulation could have a negative impact on state residual market mechanisms and other state funds that ensure that highrisk individuals and businesses obtain the insurance coverage they need.

• Federal regulation could have a negative effect on the surplus lines marketplace that serves such an integral role as the “safety-valve” for the insurance marketplace for hard-to-place risks.