With stories appearing daily detailing the results of Eliot Spitzer’s investigations, some proponents of federal insurance regulation seem to believe that their cause is strengthened on Capitol Hill; however, not even Mr. Spitzer himself came to that conclusion. When he testified before the Senate Banking Committee last November, he specifically declined to support a federal insurance regulator. These relatively isolated, high-profile examples are being used as ammunition to support an optional federal charter. The fate of state-based insurance regulation will be seriously debated on Capitol Hill during this Congress. While NAMIC adamantly stands for the state-based insurance regulatory model that has served this nation well for more than 150 years, it is not blind to its deficiencies and is focused on improving state-based insurance regulatory efficiency and uniformity.
Last September at NAMIC’s convention, Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, said that federal insurance regulation is not the answer. He and Rep. Richard Baker, R-La., developed the State Modernization and Regulatory Transparency Act (S.M.A.R.T. Act) Discussion Draft, which contained neither an optional federal charter nor a federal regulator. While NAMIC favors a reformed version of state regulation, it does not oppose the S.M.A.R.T. Act because of its open competition provision.
The Financial Services Committee released a schedule for receiving comments on the discussion draft from April through June. The goal appears to be to introduce legislation and mark it up this summer, but the legislative process is often a slippery slope and policy direction can shift quickly – even in the absence of a crisis.
A good example of legislation absent a crisis was financial services integration. The Depression-era laws separating banking and securities were deemed antiquated by some who believed that they unfairly denied consumers one-stop financial shopping. There was no discernable grassroots movement to make financial integration a reality; rather, it was generated because some believed it to be a sound business model. In 1999, after several decades of relentless lobbying, regulatory actions and court decisions, Congress passed the Gramm-Leach-Bliley Act (GLBA). Since then, I have yet to find an example of a cross-industry merger between a bank and an insurance company. Even more remarkable is that the model for bank-insurance integration, Citigroup, divested itself first of its property/casualty business, and more recently, most of its life and annuity business.
There is a lesson to be learned. Every NAMIC member needs to loudly support state-based insurance regulatory reform and oppose federal insurance regulation. If this does not happen, you may find your business being regulated on Capitol Hill rather than at home.
Let’s use our enormous strength to preserve state-based insurance regulation. The time is now.
David A. Winston
Senior Vice President – Federal Affairs
Posted: Wednesday, June 01, 2005 12:00:00 AM. Modified: Wednesday, September 07, 2005 2:04:46 PM.
317.875.5250 - Indianapolis | 202.628.1558 - Washington, D.C.