Life Insurers Endorse Insurance Reform Legislation
American Council of Life Insurers
PR Newswire US
April 5, 2006
WASHINGTON, April 5 /PRNewswire/ -- The American Council of Life Insurers (ACLI) strongly endorsed "The National Insurance Act of 2006," legislation introduced by Sens. John Sununu (R-N.H.) and Tim Johnson (D-S.D.) that would modernize insurance regulation for consumers and companies.
"Senators Sununu and Johnson have introduced landmark legislation. Their measure would bring the insurance regulatory system into the 21st Century by giving insurance companies a choice between exclusive federal or state regulation. This system would be far more responsive to the needs of today's consumers and companies than inconsistent laws and regulations that are endemic to the current state-based system," said ACLI President & CEO Frank Keating.
"The National Insurance Act of 2006" would provide a streamlined regulatory structure with uniform and consistent laws, regulations and consumer protections. It would create an Office of National Insurance within the U.S. Department of Treasury.
The need for the optional federal charter has been made abundantly clear during congressional debates over issues such as data security. Congress has struggled to provide equal protections to insurance consumers in the face of differing state laws on the topic. Absent a federal charter, it is unclear how Congress could enact legislation that ensures that consumers in all states are treated equally.
"Consumers should be assured equal protection under the law -- no matter where they reside now and in the future," Keating said.
Today's patchwork regulatory system also has resulted in state-by-state product variations. "Why should policyholders facing similar risks and needs living in neighboring states not have the same policy choices or benefits?" Keating asked.
Another problem for consumers comes from the delays insurers face in unveiling new retirement and insurance products. It can take a life insurance company up to two years to introduce a product nationally due to the varying product approval processes in the 50 states and the District of Columbia, significantly hampering their ability to meet consumers' demands.
"At a time when the life insurance industry is taking on a more significant role in helping to provide for the retirement security of a growing segment of the American population, an inefficient regulatory system is no longer acceptable," Keating said.
ACLI's support of the legislation reflects a broader life insurance industry effort to help modernize insurance regulation overall. ACLI favors a dual chartering approach to regulation, where life insurance companies would have the option of either federal or state regulation. The bill is patterned in certain ways after the banking regulatory model, where banks choose between state or federal regulation.
* The optional federal charter legislation would establish a Division of Consumer Affairs and a consumer ombudsman within the Treasury Department's Office of National Insurance to specifically address consumer issues, questions, and concerns.
* The Office of National Insurance would be authorized to establish an unlimited number of district offices dedicated to consumer affairs and a Division of Insurance Fraud to address consumer concerns about fraudulent practices.
* The Office of National Insurance would protect consumers' interests by having a voice in federal tax policy affecting life insurance and annuities.
Federal authorities also would have an easier time tracking and shutting down unscrupulous activities where perpetrators move from state-to-state.
Under the legislation, states would continue to earn and retain premium tax income. Funding for federal regulation would come much in the same way that the Securities & Exchange Commission receives its funding, through fees and assessments on insurers, agents and brokers, and insurance agencies.
"One of the many reasons we strongly support this legislation is that it reflects the regulatory needs of differing companies. They will be making their chartering decisions based on what works best for their customers," Keating said.
"To address the needs of a complex and highly-mobile society, to address the needs of insurers operating nationally and internationally, to address the needs of the entire industry and the American public, the legislation introduced by Senators Sununu and Johnson represents the path to progress," Keating added.
For further details on the OFC initiative, visit http://www.acli.com/ .
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