Supporters of regulating the insurance industry at the federal level are lobbying Congress to go beyond President Barack Obama’s financial regulatory reform overhaul.
Groups like the American Insurance Association, the Financial Services Roundtable, and the American Council of Life Insurers support the White House’s efforts to create a national insurance infrastructure but are also pushing for the creation of an optional federal charter that would allow insurance companies to choose whether to follow state or federal rules.
Obama’s “white paper— called for the creation of the Office of National Insurance, which would be charged with advising the Treasury Department on issues of international trade and industry solvency.
The White House didn’t go as far in restructuring the system as many industry experts expected in light of the implosion of insurance behemoth American International Group Inc. The current system has $6.3 trillion in assets under state-regulated management and is supervised at the state level by insurance commissioners.
The Financial Services Roundtable, in particular, has been out front lobbying for a federal charter to be included in the financial regulatory overhaul.
“The proposal is a good first start,— said FSR’s Scott Talbott. “We’re going to continue to push to give the insurance industry a federal charter.—
“If you look at the principles Treasury espouses, those can only be accomplished through a federal charter,— he added.
Proponents of the state regulatory system disagree, arguing that the White House did not mandate a federal charter because it isn’t needed.
“You don’t want to try to fix what ain’t broken,— said Robert Gordon of the Property Casualty Insurers Association of America. “We’re very pleased that the administration recognized that the current [financial crisis] did not stem from widespread problems in the insurance industry.—
Still, that’s not slowing down the Roundtable.
The trade association is expected to send a letter to Congress this week asking lawmakers to give insurers the ability to be regulated at the federal level.
Additionally, Agents for Change, a group of more than 7,000 insurance agents, is hosting its annual legislative conference Wednesday. The group will have several dozen of its members meeting with more than 60 Members of Congress lobbying “to share their stories as to why the state-based regulatory system is failing them, but more importantly why it is failing their clients,— according to Agents for Change Executive Director Peter Ludgin.
The AIA is also pushing for a federal charter, but additionally it is focusing on making sure Obama’s plan is successfully implemented.
“I think going forward we are going to work with the administration in getting an effective Office of National Insurance up and running,— AIA head Leigh Ann Pusey said.
So far, AIA hasn’t undertaken a major ad campaign on the issue but could in the future, according to AIA spokesman Blain Rethmeier.
Advocates of the federal charter have been cheered by the growing support for a bill by Reps. Melissa Bean (D-Ill.) and Ed Royce (R-Calif.) that would set up an optional federal charter, according to insurance lobbyists.
Reps. Jim Cooper (D-Tenn.) and Debbie Halvorson (D-Ill.) signed on to co-sponsor the bill last week.
USAA’s Brian Conklin said the Bean-Royce legislation is the insurance company’s highest priority because of the mobility of their customers, military families.
“The current system disproportionally affects the military community,— Conklin said.
USAA is currently going over its legislative strategy, but will be “ramping— up soon, according to Conklin.
Opponents of federal regulation argue that it would weaken consumer protections, raise costs and be worth billions of dollars annually to insurers.
The Independent Insurance Agents & Brokers of America’s Charles Symington cheered the president’s decision to not include a recommendation for an optional federal charter.
“In many respects the battle over the optional federal charter has been between Main Street and Wall Street,— Symington said. “The administration appears to have initially decided that the arguments are on the side of Main Street America, small business and consumers.—
The Property Casualty Insurers Association of America and the National Association of Insurance Commissioners are both trying to draw the focus away from a federal charter, arguing that the insurance industry is not the cause of the current economic crisis and should not be targeted as such and instead home in on systemic risk issues.
The NAIC is using its state commissioners to help make the case to Congress and has also engaged public relations firm Edelman.
“The current crisis if nothing else showed the rigorous regulation of the insurance industry did exactly what effective regulation is expected to do, protect consumers,— said Michael McRaith, director of the Illinois Department of Insurance.