In September, U.S. Rep. Mike Oxley (R, Ohio) and U.S. Rep. Richard Baker (R, La.) introduced draft legislation to reform insurance regulation. Titled the "State Modernization and Regulatory Transparency" (SMART) Act, the bill contains two main components aimed at improving insurers' ability to get products to market faster:Rate Deregulation: Under SMART, federal authorities would pre-empt state rating laws to create nationwide competitive insurance pricing. This provision of the legislation calls for deregulation of personal lines, phasing in over a two-year period. In the first year, rates could move within a band of plus or minus 7%. In the second year, the band would increase to plus or minus 12%. In the third year, rating would be deregulated.
A State-National Insurance Coordination Partnership: The legislation would establish a seven-member panel, lacking any regulatory or supervisory authority. The panel would consist of three members from the National Association of Insurance Commissioners (NAIC)-one from a small, a medium and a large state; one member from the U.S. Treasury, one from the SEC and one from the Federal Reserve. The President would appoint a chairperson nominated by the NAIC. The panel also would have a liaison for the international insurance industry and a liaison to analyze the effects of national financial policy on the insurance market.
Source: TowerGroup Inc., "State Modernization and Regulatory Transparency Act: To Be Or Not To Be," 2004.
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