WASHINGTON (July 11, 2006)—The National Association of Mutual Insurance Companies (NAMIC) is convinced that insurance regulatory reform at the state level is the best and safest course for consumers and insurers alike, said a NAMIC witness in testimony before the Senate Banking Committee here today.
NAMIC Chairman Robert A. Wadsworth, chairman and CEO of Preferred Mutual Insurance Company of New Berlin, New York, testified before the Senate Banking, Housing, and Urban Affairs Committee hearing on “Insurance Regulation Reform.”
“The present system of state regulation is too slow and cumbersome and often denies consumers the benefits of competition,” stated Wadsworth. “Consumers and insurers have a shared interest in a modernized system of regulation that will facilitate the bringing of new products to market in a timely fashion and ensure that they are competitively priced.
“NAMIC believes that reform at the state level is more likely to produce better results than federal involvement in insurance regulation."
“Unlike banking and other financial service industries, the property/casualty insurance industry is primarily a state-based business. While some of our products cover interstate activities, most of our products that directly affect your constituents – auto, farm, and homeowners insurance – are single state products. NAMIC believes that state-level regulators have the best understanding of our products and the people for whom they provide protection.”
While the state regulatory structure has worked well for years, it has not always kept up with changing times. Insurers, large and small alike, need several changes in the regulatory structure in and among the states if they are to provide customers with the products they need at the lowest possible prices:
“Notwithstanding the misguided laws and regulations that plague insurance markets in many states,” stated Wadsworth, “the decentralized system of state-based insurance regulation has inherent virtues that would be lacking in a national insurance regulatory system.” These include:
Is there a need for federal regulation? “No, NAMIC does not believe there is a need to create a new federal agency or an optional federal charter to regulate the property/ casualty insurance industry. At the same time, states must enact reform,” said Wadsworth.
Wadsworth noted that states have made significant progress in addressing antiquated rules, such as those involving price controls and company licensing restrictions, and the results in recent years have been encouraging.
Wadsworth described many options that federal policymakers could consider, from broader approaches such as a complete federal takeover or an optional federal charter to the narrower approaches pursued by the House Financial Services Committee in different SMART bill drafts and in H.R. 5637, the Nonadmitted and Reinsurance Reform Act.
“However, NAMIC is deeply concerned that the optional federal charter proposal embodied in S. 2509 could lead to negative outcomes,” said Wadsworth.
NAMIC’s greatest concerns include:
Wadsworth ended his testimony by stating, “NAMIC believes that the states have not acted as rapidly and as thoroughly to modernize insurance regulation as we believe is necessary, but we are encouraged they have picked up the pace of reform and are headed in the right direction.
“The states need more time and perhaps a federal prod to complete the job. Given this recent progress and the risks associated with creating an entirely new federal regulatory structure, NAMIC is convinced that reform at the state level is the best and safest course for consumers and insurers alike.”
Wadsworth’s testimony can be accessed at NAMIC Online.
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Posted: Tuesday, July 11, 2006 12:00:00 AM. Modified: Friday, September 22, 2006 10:23:47 AM.
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