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Sununu touts federal insurance regulator |
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By Jessica Holzer
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Posted: 10/25/07 07:03 PM [ET] |
Lawmakers pushing for the creation of a federal insurance regulator say the country’s banking industry shows that a two-tiered system benefits consumers.
“That regulatory competition between state regulators and federal regulators has served consumers quite well,” Sen. John Sununu (R-N.H.) argued at a policy breakfast hosted by The Hill on Wednesday.
Along with Sen. Tim Johnson (D-S.D.), Sununu reintroduced legislation earlier this year to institute an optional federal charter for insurers, which are currently state-regulated. Reps. Melissa Bean (D-Ill.) and Ed Royce (R-Calif.) are the sponsors of a companion bill in the House.
The lawmakers believe a federal insurance regulator will spur more competition and innovation in the industry that will ultimately benefit consumers. They cite the $24 billion insurance trade deficit as evidence that U.S. insurers haven’t kept pace with their foreign-based rivals.
The insurance industry is split on the issue, with proponents claiming it will slash the costs of complying with a patchwork of regulations across 50 states. Aside from large property and casualty insurers and big banks, the legislation has the backing of most of the life insurance industry, which competes with the federally regulated securities industry for baby boomers’ retirement assets.
Meanwhile, the National Association of Mutual Insurance Companies (NAMIC) and the Independent Insurance Agents & Brokers of America (known as the “Big I”), are firmly opposed to the bill. They are joined by life insurer Aflac, which boasts one of the largest political action committees in the industry.
In addition, groups representing state governors, state legislatures and state insurance commissioners are fighting the bill. Consumer groups also argue that it will spark a race to the bottom in terms of consumer protections.
“We believe the state system needs reform, but we don’t think that creating an additional layer of federal bureaucracy is the answer,” Justin Roth, NAMIC’s senior director for federal affairs, said.
Charles Symington, the Big I’s senior vice president for federal affairs, argued, “The federal charter would only lead to greater burdens and duplicative regulations for our 300,000 members across the country.”
On Wednesday, the American Council of Life Insurers (ACLI), one of the most vocal advocates for the legislation and a sponsor of the breakfast, unveiled a study concluding that an optional federal charter would boost competition and innovation in the insurance industry. Earlier this year, the trade group released a study finding that a federal regulator would generate up to $5.7 billion in savings for the 284 life insurers analyzed.
Speaking at the breakfast, ACLI president and former Republican governor of Oklahoma Frank Keating argued that those savings would be passed on to consumers, reducing prices by “an average of 2 percent on each policy.”
Despite the push for a federal insurance regulator, the legislation has remained on the backburner in Congress.
When he introduced it this spring, Sununu said his bill had “very realistic” chances of passing through the Senate Banking panel this year. This now looks unlikely, and on Wednesday, Sununu lowered his expectations, saying that there was a “very good chance” for Senate hearings this year.
Proponents were cheered by a House subcommittee hearing earlier this month in which lawmakers expressed frustration with the sluggish pace of reform at the state level. “That hearing really worked to the benefit of enlightening members to the problem,” Royce said.
Bean argued there was “greater receptivity” in Congress to the legislation this year, but acknowledged that the issue hadn’t taken hold with voters: “Even though the consumers back in our districts aren’t asking for this, we all know they will benefit.” |
