WASHINGTON - Banking and insurance groups testified Tuesday on Capitol Hill in favor of a national charter for insurance companies in addition to state charters.

"Federal chartering for insurance would benefit consumers by permitting more uniform policies, greater product choice, increased competition, product availability, and mobility," Glen Milesko, chairman and chief executive officer of Banc One Insurance Group of Milwaukee, told the House Commerce subcommittee on finance. "It would enhance the quality of insurance regulation, while maintaining the integrity of the state insurance regulatory system."

Banking groups such as the ABA Insurance Association, for whom Mr. Milesko spoke, have been lobbying for a federal charter since passage last year of the Gramm-Leach-Bliley Act, which permitted banks to merge with insurance and securities companies. National banks want to be able to conduct insurance activities across state lines with the same freedom they have in their traditional businesses.

The House hearing marked the first time that insurance industry groups, fearing retribution by their turf-conscious state regulators, have so publicly endorsed a federal charter. Still, they chose their words carefully. The National Association of Insurance Commissioners is developing a plan, due in December, that would let insurance companies operate regionally or nationally under cooperative agreements among states.

Drayton Nabers. Jr., testifying on behalf of the American Council of Life Insurers, described the current regulatory system as inefficient and called for change.

Mr. Nabers, chairman and chief executive of Protective Life Insurance Co. of Birmingham, Ala., said the council is willing to work with state governments and the commissioners group to improve the state-based system. However, the council is also working on draft legislation for an optional federal charter, he said.

Insurance industry officials said that if state governments stall in their efforts to establish a more streamlined system, a federal charter must be available as an alternative.

Lawmakers were supportive of state efforts, but held out the possibility of federal action.

"I hope that we can keep reform efforts at an expedited pace," said Rep. Michael G. Oxley, R-Ohio, the subcommittee chairman. "I challenge both the states and the industry to work toward December of this year to put into action the first plans for achieving uniformity of insurance regulation, with comprehensive reform efforts following soon thereafter."

Meanwhile, adding weight to the charge that the current regulation system is weak at the state level, the General Accounting Office released a scathing report Monday on the failures it uncovered in its investigation of a $200 million embezzlement scam.

Martin Frankel, who is alleged to have stolen money from the seven insurance companies that he was said to have secretly controlled through a Tennessee investment company, was aided by lax state oversight, the GAO report said. Regulators in Tennessee, Mississippi, Missouri, Oklahoma, and Arkansas had the opportunity to discover the alleged scheme at various points in the cycle, but consistently failed to do so, the report said.

Testifying before the Commerce subcommittee Tuesday, Richard J. Hillman, an associate director in the GAO's general government division, said the Frankel case underscores the increasing need for information-sharing among regulators, particularly in the post-Gramm-Leach-Bliley world.

Rep. John D. Dingell, D-Mich., used the report to criticize the state regulators. "If state regulators cannot do the job insurance consumers deserve and require," he said in the hearing, "new regulatory mechanisms must be put in place that will."

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