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INSURANCE REGULATION

THE ISSUE IS. Whether to change the current state-based system of insurance regulation. Two major proposals before Congress are an optional federal charter bill and the State Modernization and Regulatory Transparency (SMART) Act discussion draft.

IT'S IMPORTANT BECAUSE. The issue of Insurance Regulatory Reform was among the top legislative issues for NAMIC during the past year. The debate over whether to reform insurance regulation became more sharply focused in the 108th Congress when House Financial Services Committee Chairman Mike Oxley (R-Ohio) circulated a discussion draft of his SMART Act in August, 2004. Prior to that, on March 14, 2004, he outlined to the National Association of Insurance Commissioners (NAIC) his "roadmap for regulatory reform." On March 31, 2004 then NAMIC Chairman Tim Hegarty, current NAMIC Chairman Wayne White and NAMIC President Chuck Chamness sent a letter to Chairman Oxley supporting his efforts and reiterated NAMIC's strong support for state insurance regulation and for reforms to insurance regulation providing an environment of open competition where companies and consumers benefit. Specifically, NAMIC's letter expressed support for Chairman Oxley's statements as follows:

  • That the House Financial Services Committee is not considering either an optional federal charter or a federal insurance regulator and
  • That the Committee has rejected the notion of a dual federal-state regulatory system.

NAMIC further indicated to Chairman Oxley that it believes that the concepts and goals outlined in his speech to the NAIC can be accomplished without federal regulation. The NAMIC Regulatory Structure Task Force held its first meeting on March 31 and April 1 at NAMIC's DC office. The Task Force heard from the then NAIC President and House Financial Services Committee Counsel. The Task Force agreed that rate regulation reform and designing an enforcement mechanism would be the most difficult in which to reach consensus. After the SMART Act discussion draft was circulated in August 2004, NAMIC sent another letter to Chairman Oxley on September 27 supporting his efforts and again emphasized NAMIC's strong support of state regulation and NAMIC's longstanding for insurance reform in the state capitals. NAMIC again praised Chairman Oxley for rejecting an optional federal charter and a federal insurance regulator. NAMIC further praised the proposed elimination of the approval process for pricing insurance products-price controls. NAMIC's letter also pointed out that it took issue with several parts of the proposal, most notably the new elevated authority the proposal would give to the NAIC. The NAMIC Regulatory Structure Task Force met again by teleconference on November 22, 2004 to discuss the SMART Act discussion draft's treatment of open rate competition and enforcement mechanism. On December 2 the second annual NAMIC Public Policy Summit took place in Washington, DC and on the basis of the work conducted by the Task Force recommended that the NAMIC Board adopt a non-opposition position regarding the SMART Act discussion draft. The NAMIC Board of Directors considered this matter at its December 2004 meeting and adopted the position that NAMIC would neither support nor oppose the SMART Act discussion draft with the understanding that the policy would be re-examined when legislation was formally introduced in the 109th Congress.

Politically, the insurance industry is divided. The life side appears to favor optional federal charter, whereas the property/casualty side remains split with some associations advocating an optional federal charter, some advocating federal standards and the rest in favor of insurance regulatory reform at the state level.

The insurance community, companies and agents alike, recognize the need to modernize regulation of the business of insurance. In many respects, the industry is collaborating, informally, and working with the NAIC, NCSL and NCOIL to accomplish the goals of modernization and uniformity. State insurance regulation is well established within state government. The reform process will require some time before the improvements will be enacted and implemented. Insurance regulation is a complex matter and any change to the process should not be undertaken without thorough review and analysis of the impact of change to the business, companies and agents, but also to the consumers and policyholders the industry serves.

NAMIC POSITION. NAMIC supports reforming the state-based system of insurance regulation through legislation in the state capitals. NAMIC opposes federal regulation of insurance or an optional federal charter. NAMIC neither supports nor opposes the SMART Act discussion draft.

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Benjamin Franklin Public Policy Award

Every two years, NAMIC presents their coveted Benjamin Franklin Public Policy Award© to lawmakers who have supported a stronger insurance market at least 75 percent of the time. This is demonstrated based on their support of NAMIC's position on certain roll call votes taken, or being a principal player/sponsor on legislation affected the property/casualty insurance industry, during the previous Congress.