The OFCC letter–signed by 135 financial services industry companies, including a number of leading insurance entities (see NU, June 20, page 7)–said the current insurance regulatory system is broken and the most appropriate way to deal with it is to provide companies with an option to have a federal insurance charter.

The letter sent by the IIABA in response said an optional federal charter was unnecessary and legislation now being drafted by the House Financial Services Committee creating federal standards for insurance regulation was more appropriate.

The State Modernization and Regulatory Transparency Act, better known as the SMART bill, is expected to be introduced before Congress leaves for a month's summer recess on July 29. It is being drafted by the Republican leadership of the committee, headed by Chairman Mike Oxley of Ohio and Richard Baker from Louisiana, chairman of the Capital Markets Subcommittee.

In responding to the latest OFCC statement, IIABA denied any inaccuracies.

Among the members of the OFCC are the American Insurance Association, the American Council of Life Insurance, and the Council of Insurance Agents and Brokers. The Financial Services Forum and the Financial Services Roundtable–both pan-industry trade groups with a cross-section of insurance, banking and securities industry members–are also members.

“The reaction of the Independent Insurance Agents & Brokers of America to our June 13 letter expressing broad industry support for an insurance federal charter option is disappointing and inaccurate,” the OFCC said in a statement released by the American Bankers Association. An ABA offshoot, the American Bankers Insurance Association, did most of the work in developing the letter and getting financial services companies to sign it.

“It is beyond dispute that major restructuring of the insurance regulatory framework is long overdue and that the status quo is no longer a viable option,” the OFCC said. “The rigid confines of the past work to the disadvantage of our customers and deny companies, agents and brokers the flexibility they need to compete effectively in today's marketplace.”

The OFCC also said “insurance regulatory reform must be driven by the needs of our customers and by the demands of operational efficiency. The optional federal charter initiative does just that.”

In a statement defending the IIABA's position, Robert Rusbuldt, the association's CEO, said he “strongly denies any inaccuracies in our characterization of optional federal regulation or the Oxley/Baker SMART proposal.”

In fact, he added, “we agree with the OFCC statement that 'indeed, insurance regulatory reform must be driven by the needs of our customers and by the demands of operational efficiency,' [but] we disagree with the OFCC on the means to obtain this goal.”

He said IIABA believes “targeted federal reform of the state system, proposed and supported by Chairman Oxley and Chairman Baker in the SMART Act proposal, makes much more sense for insurance consumers and for bringing about immediate efficiency in our regulatory system.”

“Although we agree on the goals, because we disagree on the means to obtain those goals it appears that the OFCC has made a false allegation that we are inaccurate,” Mr. Rusbuldt said. “This is not about the number of supporters versus opponents since agents and regional companies overwhelmingly oppose federal regulation of insurance. However, independent agents strongly support reform of the current system.”

Quotebox with Rusbuldt mug:

“We agree with the OFCC statement that 'indeed, insurance regulatory reform must be driven by the needs of our customers and by the demands of operational efficiency,' [but] we disagree with the OFCC on the means to obtain this goal.”

Robert Rusbuldt, CEO

IIABA