Optional Federal Charter Not Dead Yet
New life was breathed into legislation that would allow insurers to opt out of state regulation in favor of a federal charter when a new lobbying effort was mounted recently by a powerful coalition.
A number of industry organizations applauded the President’s proposal for an Office of National Insurance but said it didn’t go far enough. As proposed, the office would serve primarily as an advisor to the Treasury Department and leave large national insurance companies subject to regulation by the 50 states.
Critics of state regulation have long called for legislation that would allow companies to choose to be regulated under an Optional Federal Charter. They are organizing support for a bill introduced by Reps. Melissa Bean (D-IL) and Ed Royce (R-CA) with co-sponsors Jim Cooper (D-TN) and Debbie Halvorson (D-IL) that would allow companies to choose federal regulation.
Among the groups lobbying for the Optional Federal Charter bill are the American Insurance Association that represents large commercial insurers, the American Council of Life Insurers, and the Financial Services Roundtable. Scott Talbott, a Roundtable spokesman, called the President’s proposal “a good start” but
declared , “We’re going to continue to push to give the insurance industry a federal charter.”
The coalition was joined in supporting a federal charter by Agents for Change, a group of 7,000 insurance agents who blitzed their Congress members during a recent legislative conference in DC. Peter Ludgin, Executive Director, said the visits to legislators were intended “to share their stories as to why the state-based regulatory system is failing them, but more importantly why it is failing their clients.”
USAA, the insurer that covers military personnel, joined the chorus advocating federal regulation. Brian Conklin, a USAA spokesman, said Optional Federal Charter legislation is the Company’s highest priority due to the mobility of military families. “The current system disproportionally affects the military community,” according to Conklin.
Despite the wave of support, any form of federal regulation continues to face formidable opposition from entrenched state regulators and their powerful lobby, the National Association of Insurance Commissioners. They are joined by the Property Casualty Insurers Association of America, the National Association of Mutual Insurers, and the Independent Insurance Agents & Brokers of America.