You are here:HomeIssuesProtecting State Insurance Regulation 2010Rep. Frank Tells NCOIL Optional Federal Charter to Be Debated in 2011

Rep. Frank Tells NCOIL Optional Federal Charter to Be Debated in 2011

No matter which party controls the House of Representatives, Congress will see a "major push" on optional federal charter legislation in the next session, according...
July 13, 2010

No matter which party controls the House of Representatives, Congress will see a "major push" on optional federal charter legislation in the next session, according to House Financial Services Committee Chairman Barney Frank (D-Mass.). Frank said he kept federal charter discussions off the table during negotiations over the financial regulatory reform bill he co-authored, but said he will be a "neutral party" in the federal charter debate.

Rep. Frank said that one option worth considering is federal oversight of life insurance, which has more in common with other financial products than many insurance products. He also said a federal option for insurance regulation would likely have minimal disruption on state consumer-protection laws. Perhaps to demonstrate his neutrality on the issue, Frank also said "Insurance has been very well regulated at the state level" and "Insurance should continue to be state-regulated."

Rhode Island State Rep. Brian Kennedy said he remains concerned about optional federal charters, both because the states have done an excellent job in insurance consumer protection, and the potential loss of premium tax revenues. "The states have put so many of those important consumer protections into place to deal with all sorts of insurance issues ... the states derive substantial premium taxes from the insurers that happen to be there," said Kennedy, chairman of NCOIL's Communications, Financial Services and Interstate Commerce Committee.

What It Means to Agents: Main Street insurance agents who support state regulation of insurance may be asking themselves, "Why is OFC being debated again?" The answer is simple: those who favor federal regulation of insurance are, if anything, persistent. They won't go away, because too much money is at stake.

Never mind that successive Congresses - both Republican and Democratic - have looked at optional federal charters and consistently rejected them. Never mind that there is continuing majority support for state regulation of insurance - especially since inept federal regulation of banks and securities led to the financial meltdown that almost tanked the world's economy.

Optional federal charters are being pushed by narrow economic interests that stand to benefit by getting the federal government to allow them to evade the kind of prudent, state-based supervision that saved the insurance industry from the financial meltdown. What interests? Big banks, major securities firms and a handful of insurance carriers that may want to go "global" and stop paying agents in the process. In short, the combatants in this battle are the same as always: it's the advocates of federal regulation versus Main Street. PIA is Main Street.