Representatives from three insurance industry associations testified today before Congress on the recently submitted Federal Insurance Office’s report on how to modernize and improve the system of insurance regulation in the United States.
“The recommendations offered in this report are, for the most part, modest in scope and suggest that the insurance regulatory system is functioning at a high level and does not require a significant overhaul or restructuring,” said Jon Jensen, chairman of the Independent Insurance Agents & Brokers of America (IIABA) government affairs committee, and president of Correll Insurance Group, an independent insurance agency.
Jensen testified before the U.S. House of Representatives Committee on Financial Services Subcommittee on Housing and Insurance, that IIABA, the nation’s oldest and largest national association of independent insurance agents and brokers, agrees strongly with several of the recommendations, including FIO’s call for the adoption of the much-discussed National Association of Registered Agents and Brokers (NARAB II) producer licensing reform legislation, and is skeptical about others.
Jensen presented the association’s position in agreement with the Federal Insurance Office (FIO) report that insurance regulation could be improved and modernized in certain areas, but that any federal action should be targeted and limited with day-to-day regulation left in the in the hands of state officials.
The report, submitted to Congress by FIO in late December, endorsed the need for Congress to enact the NARAB II legislation. The association has lobbied for the bill for several years and is pleased that it was recently passed by the Senate.
Bob Restrepo, president and CEO of the State Auto Insurance Companies, and board chair and chairman of the Property Casualty Insurers Association of America (PCI), also testified before the Housing and Insurance Subcommittee. “We would fundamentally disagree with FIO’s conclusion that the need for uniformity and the realities of globally active, diversified financial firms compel the conclusion that federal involvement of some kind in insurance regulation is necessary or that a hybrid federal-state approach would be preferable,” Restrepo said.
PCI, which is composed of more than 1,000 member companies representing a broadest cross-section of insurers of any national trade association, and State Auto agree with several recommendations in the FIO report. However, the FIO report makes several recommendations that do not meet PCI’s test of promoting and protecting the viability of a competitive private insurance market for the benefit of consumers and insurers. Restrepo suggested the subcommittee look at the best standards for good regulation and good regulators and where the current system can be improved.
PCI said the following recommendations provided in the FIO report could improve the market:
- Improvements towards free-market pricing. PCI and State Auto agree with FIO’s analysis on rate regulation and suggest promoting the model laws, for example, those of the National Conference of Insurance Legislators, to eliminate prior approval rate requirements.
- Better market conduct examination and coordination. Although the states have made some improvements in market conduct, PCI and State Auto agree with FIO that more progress is needed.
- Commercial streamlining. Commercial lines regulation, especially product approval, should be modernized.
J. Stephen Zielezienski, SVP and general counsel for the American Insurance Association (AIA), a property-casualty insurance trade organization, emphasized in his testimony AIA’s view that the insurance regulatory system should be focused on the core functions of financial solvency and market conduct regulation, while leaving pricing and policy decisions to the private marketplace.
“AIA has consistently held that the regulatory system domestically and internationally should support the growth of competitive, private markets. Advancing private market competition empowers consumers and provides them with purchasing options, which in turn enhances affordability and availability,” Zielezienski said.
“AIA agrees that there is a need for greater regulatory uniformity across the states. Efforts to identify rate-related regulatory practices that promote more competitive markets for personal lines insurance will also be beneficial,” Zielezienski said. “However, any movement toward proposing binding risk classification standards would be counterproductive. In addition, AIA concurs that commercial lines insurance regulation should continue to be modernized so that insurers may best meet the needs of their sophisticated commercial customers with new and innovative products.”
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