Yara Zakharia, Esq.
In an unprecedented move, the American Council of Life Insurers (ACLI) is pushing for legislation that would replace the current patchwork of state laws for policy issuance with a single, national and modernized system of consumer protection and insurance regulation. The ACLI, a trade organization representing national insurers like Lincoln Financial, State Farm and Prudential, seeks to write a new page in the 150-year history of state regulation. Instead of requiring life insurance companies to issue 50 separate policies to conduct business across the country, the proposed regulation will provide agents the option of being governed either by the federal system or the various states' laws.
The ACLI anticipates that the proposed scheme will yield as much as $5.7 billion in annual savings. Such a state-of-the-art, uniform system of consumer protection could open the door to a more competitive marketplace as well as enable Americans to have quicker access to a more extensive choice among life insurance products. ACLI's C.E.O. and president Frank Keating stated that the recent analysis that was released "reinforces what we have said all along, which is that consumers would be the true beneficiaries of an optional federal charter system for insurers."
One of the reasons why the ACLI is urging Congress to pass this legislation is so that red tape would be eliminated at a time when life insurers are extending a host of services ranging from disability insurance to annuities and 401k plans. In 2006, Senators Tim Johnson (D-S.D.) and John Sununu (R-N.H.) introduced a bill that would have ushered in an optional "federal charter system". According to Keating, groundbreaking legislation such as "The National Insurance Act of 2007" whose objective is to reform the regulatory structure at a period of time "when the life insurance industry is taking on a more significant role in helping to provide for the retirement security of a growing segment of the American population" is indispensable. He reassured that a streamlined regulatory system would not translate into lax regulation.
The National Insurance Act of 2007 would establish an Office of National Insurance (ONI) within the U.S. Department of the Treasury that would be in charge of regulating the market activities and solvency of federally-chartered life insurers. The ONI would be commissioned to set up a Division of Insurance to crack down on fraudulent practices and resolve consumers' concerns as well as open district offices focusing on consumer affairs.
The bill was introduced for the second time, just before the Memorial Day holiday, and it appears that the call for federal life insurance regulation is gaining momentum. ACLI spokesman Jack Dolan affirmed that the bill "has a better chance with each time". Keating offered justification for its passage: “To address the needs of a complex and highly-mobile society, to address the needs of insurers operating nationally and internationally, to address the needs of the industry and the American public, the legislation introduced by Senators Sununu and Johnson represents the path to progress".