WASHINGTON, July 27 /PRNewswire-USNewswire/ --A bill calling foroptional federal charters for insurers would make consumer protectionoptional, according to the National Association of Professional InsuranceAgents. The National Insurance Act of 2007, introduced this week in theHouse, would create a massive new federal insurance bureaucracy and thenpermit insurance companies to opt out of state consumer protection laws. "This bill is bad for consumers, bad for the insurance business and badfor American taxpayers," said PIA Executive Vice President & CEO LenBrevik. "It is being pushed by special interests that want to establish aduplicative federal insurance regulatory regime for their own benefit andweaken consumer protections in the process." The bill introduced on Wednesday July 25 by Rep. Ed Royce (R-Calif.)and Rep. Melissa Bean (D-Calif.) is companion legislation to S. 40,introduced by Senators Tim Johnson (D-S.D.) and John Sununu (R-N.H.) on May24. "Advocates of an optional federal charter claim that the system ofstate-based insurance regulation needs to be changed so they can operatemore efficiently," Brevik said. "But what they actually want is to expandtheir market share by creating a new federal bureaucracy that puts theircompetitors at a disadvantage." PIA said that the federal insurance charter envisioned under thislegislation would not truly be optional. It would allow large financialservices entities with insurance operations to move in and out of markets -anything from several territories to entire regions of the country - solelyat their whim, thereby disrupting markets and diminishing, not enhancing,options for consumers. In addition, the bill would impose the costs of anunnecessary new federal bureaucracy, the Office of National Insurance (ONI)in the Treasury Department, on businesses and individual taxpayers. PIA believes that consumers are best served by an insurance system thatis regulated by state departments of insurance. These state departments aremore knowledgeable about the specific concerns of their states and regions.When urgent needs arise, a state regulator is able to respond in a moreefficient manner than a federal regulator who may be subject to federalpolitical pressures. This helps ensure that consumers, both individuals andbusinesses, continue to have access to a robust insurance marketplace toprotect them, rather than one that is mired in bureaucratic red tape andleaves them with uninsured exposures. PIA is pleased to join with the National Conference of InsuranceLegislators (NCOIL), the National Governors Association (NGA), the NationalConference of State Legislatures (NCSL), the Council of State Governments(CSG), the National Association of Insurance Commissioners (NAIC) and otherorganizations in strong opposition to The National Insurance Act of 2007. Proponents of optional federal charters have pointed to their use inbanking as evidence that such a system works well. Brevik countered that infact, the opposite is the case. "Those who point to the banking industry as an example of optionalfederal charters working well are suffering from a major case of convenientamnesia," Brevik said. "They're forgetting the savings and loan fiasco." "Let's look at the real record of optional federal charters," hecontinued. "In the 1980's, over 1,000 savings and loans failed, andAmerican taxpayers were stuck with a $150 billion bill. Why? Deregulationhad allowed banks to opt for either a state or federal charter.State-chartered institutions, not wishing to be outdone, scrambled to befederally-chartered and a competition ensued between the federal governmentand the states over investment capital. This led to a prospectivedismantling of regulatory standards as a regulatory 'race to the bottom'developed that left consumers without the protections they needed." Brevik said the financial chaos that ensued as a result of optionalfederal charters in banking led directly to the most serious financialcrisis in our nation's history. "Why would anyone want us to repeat this inthe insurance industry?" he asked. "The argument advanced by supporters of this proposal that the currentsystem of state regulation of insurance is inefficient and outdated issimply not true," Brevik said. "Just look at the financial profile of theinsurance industry and you see phenomenal success, not inefficiency. Ofcourse, continuing reforms must be made by states to bring about evengreater efficiency. But Congress should not exchange proven success forunintended consequences. For more than 200 years, insurance in the UnitedStates has been regulated by the states and the result has been that thesuccess of the insurance industry makes it the envy of the world." "But now, that 200 year track record of success is under attack by anaxis of self-interest: big banks, big securities firms and big lifeinsurance companies," Brevik said. "Main Street insurance agents do notbelieve that all roads lead to Washington, D.C. They know consumers arebest served by state-based regulation." Founded in 1931, PIA is a national trade association that representsmember insurance agents and their employees who sell and service all kindsof insurance, but specialize in coverage of automobiles, homes andbusinesses. PIA members are Local Agents Serving Main Street AmericaSM.PIA's web address is
Professional Insurance Agents Say National Insurance Act Would Make Consumer Protection Optional
August 08, 2007, 1:04 a.m. EDT 4 Min Read
