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  Guest Editorial

Why the National Insurance Act Would Be Good for Everyone

Posted 9/08/2006
By Sen. John E. Sununu

Sen. John E. Sununu explains how the National Insurance Act would create a more uniform system for regulating life and property/casualty insurance.

Today, a clear, uniform regulatory system for national and global insurers is more important than ever for American consumers. Insurance regulation in the United States currently spreads across more than 50 jurisdictions, imposing costs on consumers in the form of higher compliance fees and onerous approval barriers that delay market entry for new products.

Congress passed the Gramm-Leach-Bliley Act in 1999, modernizing the regulation of banking and securities, and allowing these financial industries to become more integrated, market-oriented and technologically advanced. Subsequently, consumers have benefited from improved competition and innovation.

To bring such a dynamic and competitive regulatory environment to the insurance industry, this spring I introduced the "National Insurance Act" with Sen. Tim Johnson, D-S.D., to create an optional federal charter for life and property/casualty insurance. A more uniform regulatory environment, similar to the highly successful dual banking system, stands to substantially improve the climate for those who buy, sell and underwrite insurance in several critical ways.

Choice. A federal system of regulating insurance would allow insurers and agents or brokers to elect a federal or state charter and license, and would permit conversion between federal and state status as warranted. This approach would preserve the state regulatory system for those who choose it.

Stability. An independent Office of National Insurance would establish financial regulations based on the National Association of Insurance Commissioners model laws to ensure the safe and sound operation of insurers.

Consumer Protection. A Division of Consumer Affairs, as created by the regulator, would oversee strict regulations and guard against unfair and deceptive practices by insurers and agents for the advertising, sale and administration of products. The bill establishes a Division of Insurance Fraud, and would make insurance fraud a federal crime. An Office of Ombudsman would act as a liaison between the regulator and any person adversely affected by the office's regulatory activities. The bill does not, however, permit the federal regulator to set rates or price controls for insurance, relying instead on competitive pricing within the marketplace.

Efficiency. The uniformity and market-based reforms captured in the legislation would help to eliminate a tangled web of regulation created by an overwhelming amount of state rules for financial regulation, licensing, policy forms, rates and market conduct exams - helping to bring new products to market more quickly.

Expertise. The Office of National Insurance would also provide lawmakers with an expert on issues affecting policyholders, the health of the insurance industry, and the overall economy. Currently, there is no single federal entity that Congress can turn to for expertise and guidance regarding policies that affect the insurance industry.

A fractured state regulatory scheme does not serve the insurance sector or its consumers well. Gramm-Leach-Bliley was a positive achievement for Congress, producing dramatic results for the nation's economy and consumers.

It is time for Congress to revisit the unfinished business of financial services modernization and consider the strengths of an optional federal charter for insurance.

Rep. Sununu Sen. John E. Sununu is a member of the U.S. Senate Committee on Banking, Housing and Urban Affairs.

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