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The Royce-Bean Bill - A Federal Insurance Deregulation Bill

PIA along with the NAIC, NAMIC, NCOIL and others are actively opposing H.R. 1880. Realizing that its supporters are trying to portray it as...
May 5, 2009

PIA along with the NAIC, NAMIC, NCOIL and others are actively opposing H.R. 1880.  Realizing that its supporters are trying to portray it as a reform measure that would strengthen insurance regulation - which is false - we have emphasized what it really is: a federal insurance deregulation bill designed to supplant state regulation.

A reading of the bill text [links to Library of Congress website--search for bill number "H.R. 1880"] clearly reveals its intent: to drive a stake through the heart of the state-based insurance regulatory system. In its place, it would set up a national system of regulation exempt from the existing state system of insurance regulation.

That optional federal charter advocates would again attempt to advance their proposal now -- especially in light of the economic downturn and the general sentiment for more, rather than less regulation -- should not come as a total surprise. The advocates of federal insurance regulation hope that they can piggy-back their agenda onto calls for a financial systemic regulator.

H.R. 1880 is built on the false premise the federal regulation is superior to state regulation and that state regulation failed while federal regulation succeeded. There's just one problem: the exact opposite is true. Advancing H.R. 1880 requires convincing people that the AIG bailout was about AIG's insurance operations. It was not. It requires that a deregulation bill be sold as one that strengthens insurance regulation, when in reality it would greatly weaken it. This is a case of proposed legislation being based upon faulty assumptions, an incorrect premise and a wholesale misreading of the facts. Or to paraphrase an oft-quoted saying: "It has the added disadvantage of not being true."

Highlights of H.R. 1880:  H.R. 1880 is more expansive than previous OFC versions, all of which have failed. While under terms of the new bill states would maintain responsibility for regulating state-licensed insurers, agencies and producers, an entire new class of "national" insurers, agencies and producers would be established. These would come under a national federal regulatory structure that would exist separate from state-chartered and licensed entities and producers.

The bill provides for the appointment of a National Insurance Commissioner overseeing a National Insurance Office. It would mandate that a physical National Insurance Office be opened in all 50 states. It would empower the National Insurance Commissioner to set up self-regulatory organizations and empower them to carry out the function of the Act. It would grant immunity to any "national insurer, national insurance agency, or national insurance producer" from "any form of licensing, examination, reporting, regulation, or supervision by a State." The new measure also would create a National Insurance Guaranty Corporation. Insurers that opt for federal oversight would be made to pay into it, as well as the guaranty funds in any state in which they do business.

What It Means to Agents:  Bottom line: those who want to tilt the insurance playing field away from Main Street insurance agents and the carriers they represent are at it again. They are determined to do whatever it takes to change our industry for their own competitive advantage. Independent agents, the carriers they represent, state regulators and legislators have successfully turned back such ill-advised proposals many times in the past. It's time for us to do it again.

State Based Supporters Won't Cede Insurance Authority Quietly (A.M. Best 5/4/09)