While NAMIC has “great respect for those suggesting an alternative regulatory scheme,” Mr. Forrester said, the group has found that “optional federal chartering” is something of an ironic misnomer, because “it seems when you get involved with the federal government you have fewer options.”

NAMICs white paper examines the reasons for regulating insurance and evaluates federal and dual regulation alternatives. The white paper concludes that reform at the state level is best.

According to Mr. Forrester, NAMICs intent in issuing the white paper was not merely to suggest that insurance regulation be reformed, but to spell out how to reform it and to participate in the process.

Although NAMIC has consistently maintained that regulation at the state level is preferable to a federal regulatory scheme, the group believes that the white paper now adequately supports its position, he said.

As part of its research, the NAMIC task force spoke with “various constituencies that are under some other regulatory scheme in the financial services industry,” such as banking and securities organizations, Mr. Forrester stated.

This process helped the NAMIC task force identify the strengths of those regulatory systems and the weaknesses in state insurance regulatory schemes, Mr. Forrester said.

One of the white paper's salient conclusions is that federal and dual charter proposals fail to offer many advantages to consumers.

Charles M. Chamness, NAMIC vice president, public affairs, explained that “there is a school of thought that insurance regulation is more of a retail form of regulation that really must be closer to the people.” In this regard, he noted, state regulatory systems are well positioned compared with a federal alternative.

In contrast, much federal regulation, such as for banking, is considered “more of a wholesale kind” of system with a solvency and wholesale corporate emphasis, Mr. Chamness continued. This means that federal regulatory schemes do not offer 800-numbers to answer consumers questions or other tools that state insurance regulators are better equipped to provide, he observed.

As to what NAMIC will do next, Mr. Forrester indicated that NAMIC wants to continue its work with the National Association of Insurance Commissioners and state regulators, he said.

But more crucially, NAMIC wants to step up its work with state lawmakers around the country, he said.

NAMIC recognized some time ago that the NAIC and individual state regulators “can only do so much,” Mr. Forrester said.

“They must have the support and leadership of the legislators in their particular states” if insurance regulatory reform is to take place, he observed.

He added that NAMIC has been educating state legislative groups on regulatory reform and that it has found “a very receptive audience.” As a result, NAMIC believes that such groups are becoming more engaged in the process, “which is absolutely critical,” he said.

Roger Schmelzer, NAMIC vice president, regulatory affairs, pointed out that the white paper refers to the work of the National Conference of State Legislators.

As described in the white paper, the NCSLs “Executive Committee Task Force to Streamline and Simplify Insurance Regulation” has been charged with the formulation of recommendations for the reform of state insurance regulation.

Mr. Schmelzer explained that NAMIC cited the NCSL task force to illustrate that means exist “to do the very thing that people think is so impossible.”

But once the NCSL task force completes it work this summer or fall, “we're still going to have to get out into the states and work with legislators to get them to enact the proposals that the NCSL has come up with,” Mr. Schmelzer admitted.

At the same time, he pointed out that the recent implementation of uniform or reciprocal producer licensing legislation in a majority of the states in a short period of time is a prime example of why NAMIC believes that reform at the state level can occur.

Mr. Schmelzer said that the same “formula” set forth in the NAMIC white paper was the one used to move producer licensing legislation required by the federal Gramm-Leach-Bliley Financial Services Modernization Act.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 22, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.