| Author | Subject: Federal insurance regulation proposal |
| kay | Posted At 20:16:03 06/14/2000
This is from the American Bankers Association's website. www.aba.com 1120 Connecticut Avenue - Washington, DC 20036 - (202) 663-5163 CONTACT: Beth Climo February 17, 2000 WALL STREET JOURNAL US Bankers Begin Push For Federal Insurance Regulator By DAWN KOPECKI WASHINGTON -- Bankers were ecstatic last year when Washington approved new financial service laws, giving the industry broad license to sell, issue and market insurance and securities products. But national lenders weren't quite as thrilled when faced with the state insurance regulatory system and the prospect of getting insurance licenses in all 50 states, living with rules set by 50 separate insurance commissioners and undergoing 50 different processes to get new insurance products approved. For large institutions, "not having to go through the state-by-state licensing and the state-by-state regulatory schemes ... would be very attractive," said Beth Climo, the incoming managing director of the American Bankers Association Insurance Association in Washington. "Now that financial modernization is being accomplished, we need to bring the regulatory system to a modern world also." That idea has some of the nation's largest financial service companies pushing for a new federal insurance regulator. Bank of America Corp. (BAC), Bank One Corp. (ONE), Chase Manhattan Corp. (CMB), First Union Corp. (FTU), Citigroup Inc. (C) are just some of the members of the American Bankers insurance arm promoting this plan. They propose to keep the current state regulatory structure in place while also giving institutions the option of getting a federal insurance charter with a centralized national regulator and rules. That set up would mirror the "dual" regulatory scheme for banks, where they have choices from state oversight to being regulated by a handful of federal agencies, said Climo. "To have a hodge podge of 50 different state charters is at best confusing and costly. And at worst it can be counterproductive," said Steve Bartlett, president and chief executive of the Financial Services Roundtable, a Washington trade group representing the nation's 100 largest financial service firms. "It adds to the cost and adds to the administrative burden, and doesn't add any value." In Florida, for example, out-of-state insurance agents have to get a Florida-licensed agent to co-sign policies sold to Florida residents. "That means they take half your profits and take on none of the liability," said Al Garesche, an aide to House Banking member Rep. Sue Kelly, R-N.Y. New York has required insurance sellers to include the state's name in the title of their company, he added. And up until recently, Texas barred non-residents from selling insurance products of any kind. "Those are all things that have nothing to do with safety and soundness," Garesche said. "They're just a pain." Even insurers themselves realize the need for change. "You'll find pretty much across the board there's dissatisfaction with the current state of affairs," said Gary Hughes, an attorney for the American Council of Life Insurance in Washington. "We're national, if not global, and we're operating within a regulatory system that was set up when insurance wasn't even viewed as interstate commerce." That has the National Association of Insurance Commissioners, which represents state insurance departments, scrambling to find ways to keep from becoming obsolete. Changes in technology and "globalization" were already putting pressure on the group to find more uniform state laws and quicker product approval processes. The association established a national registry for insurance agents about two years ago. That was, in part, a self-preservation move, aimed at staving off an attempt by lawmakers to set up a self-regulating body to license and train agents. The new financial service laws give commissioners three years to adopt uniform licensing and training standards, otherwise the National Association of Registered Agents and Brokers will be created. And regulators will have little say over the criteria agents set for themselves. George Nichols, who was recently elected to head the insurance commissioners group, is also shopping around a proposal that would provide "national treatment of insurance companies, similar to a national charter that banks have. "My agenda has been to create our own destiny rather than have banks come up to us and say they need a national regulator," Nichols said, adding that he doesn't yet know exactly what "national treatment" means. That's something his members are trying to come up with this year. "Many of them realize that we have these new competitors out there. And we will respond accordingly or we will be taken over by them," he said. "We are beginning to see people in the industry saying that they might like to see a federal regulator. And that's pressure." The one thing that Nichols and others involved in the 20-plus-year fight for new financial service laws are sure of: change is not going to happen over night. No one on Capitol Hill has yet to take up the mission. And many traditional Republicans - such as Senate Banking Chairman Phil Gramm, R-Texas - who would normally back less onerous regulations, don't exactly support taking those decisions away from the states and creating a new federal bureaucracy. "Sounds like this is the kick off of another 20-year effort," said David Runkel, spokesman for the House Banking Committee. Runkel said that his boss, Rep. James Leach, R-Iowa, said last year that a federal insurance regulator is something that "Congress would have to deal with in the future." WSJ Copyright © 2000 Wall Street Journal. All Rights Reserved. Comments or questions about our Web site? E-mail ABA''s Webmaster. Copyright 1999 American Bankers Page last modified: 6/14/00 |
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