The timing of the campaign is linked to the drafting of legislation by the staff of the House Financial Services Committee that would establish "federal standards" for state insurance regulation–a moderate step that has broad support from all areas of the insurance industry.

When the life insurance industry's latest campaign for an OFC for life carriers was launched in June, it was aimed at winning support starting in the Senate Banking Committee. But the latest effort–the so-called "rift" initiative–is designed to climax with introduction of an amendment to the federal standards bill establishing a federal charter option for life insurers when and if the legislation is marked up in the House Financial Services Committee this fall.

Partly, the "rift" effort was organized because the life insurance industry has had difficulty gaining co-sponsors for its bill in the Senate Banking Committee beyond the original core of Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D.

The "rift" release came from Levick Strategic Communications in Washington, D.C., working on behalf of a group called "Agents For Change"–created by the Financial Services Roundtable to push for an OFC option for life insurers. Presumably, the release was designed to get the media involved in the initiative by writing articles talking about a "rift" within the agent community that would give members of Congress political cover to support the calls for an OFC.

While the American Council of Life Insurers distanced itself from the release, the ACLI, the American Bankers Insurance Association and the Financial Services Roundtable all are involved in the latest initiative for an OFC for life insurers.

The release targets the Independent Insurance Agents & Brokers of America for particular scorn, charging that "the Big I is trying to squash this growing movement and maintain the status quo."

This raises a number of issues.

o First, the IIABA represents the property-casualty industry, not the life side of the business.

o Second, the Big I denies any discord within its ranks over its federal lobbying policies. "There is no truth whatsoever to the allegation made by the so-called group 'Agents For Change' that there is a rift in the independent insurance agent community regarding insurance regulatory reform," said Charles Symington, senior vice president of government affairs and federal relations.

"Big I members overwhelmingly oppose an optional federal charter. With that said, our membership does support modernizing state insurance regulation, and that is why we support the SMART Act being drafted by Reps. Mike Oxley and Richard Baker," he added, referring to the bill that would set federal standards for state regulation.

o Third, there appear to be few signs of concern over the lobbying policies of the primary life agent group–the National Association of Insurance and Financial Advisers.

David Woods, CEO of NAIFA, denied the existence of strong grass-roots support for an OFC for life. "NAIFA is not in the business of picking fights with anybody, and I don't know where this idea of a 'rift' came from," he said.

"NAIFA's whole purpose is to bring about regulatory reform that will be in the best interests of our members, their clients, prospects and policyholders. That could include any one of the number of proposals out there–the interstate compact, the SMART act, an OFC, or some other proposal that hasn't yet surfaced. Our position at the moment is to be aware and study all of them and see what develops," he added.

"There is absolutely no rift, and no challenge to our leadership," declared Mr. Woods. "We are simply studying all options."

While denying any "rift" within its ranks, or a wholesale departure of members to the so-called "Agents For Change" group–which, the release claims, "now number more than 450 agents and brokers in 40 states"–Mr. Symington does acknowledge the IIABA believes that an OFC for insurance, not specifically life, "would be incredibly onerous for independent insurance agents and brokers, as well as confusing and harmful for insurance consumers."

"As independent agents selling the products of multiple companies, our membership could be required to obtain two licenses–one for state-regulated companies and another for federally-regulated companies–even if the agent does business in a single state," he noted

Additionally, Mr. Symington said, "consumers would not know who to call when they have questions or problems. Envision this scenario: a consumer could have a federally-regulated insurer for their life insurance, a state-regulated insurer for their homeowners insurance, a federally-regulated insurer for their annuity and could have a different state-regulated insurer for their auto coverage."

Even the Council of Insurance Agents & Brokers–which has been supporting an OFC even though it has embraced the SMART approach of Reps. Oxley and Baker as a good start–acknowledged that its rival, the IIABA, has legitimate concerns about the licensing issue.

"It is appropriate for agents and brokers to be concerned that an unintended consequence of OFC legislation could be that producers get the worst of both worlds–regulation at both the federal and 50-state level," said Joel Wood, CIAB's vice president for federal government relations. "Companies could have varying requirements for licensure embedded in their agency contracts that could create that situation."

As a result, Mr. Wood said, "it is absolutely essential for The Council that any OFC legislation has an iron-clad guarantee that if federal licensure is optional for insurance companies, it must be truly optional for producers as well. If this condition is not met in any legislation that ever advances on the OFC, we will actively and loudly oppose it."

The "rift" initiative has fallen flat, reaching highly skeptical ears from people in the media familiar with the issue–and reflecting more on its initiators than on its targets–as the ACLI decision to distance itself from the effort confirms.

But privately, members of Congress and industry lobbyists believe the proposal has legs–perhaps not in this Congress, but in the next one. Key members of the House Financial Services Committee already are asking lobbyists for p-c companies if they would support a life-only charter, and p-c lobbyists believe influential members of Congress are becoming supportive.

The critical hurdle to secure essential p-c industry support is some sort of national standard for relief from state rate regulation. Otherwise, there will be no p-c insurer backing, and the initiative will languish.

Arthur D. Postal is NU's Washington Editor. He may be reached at [email protected]

"The 'rift' initiative has fallen flat, reaching highly skeptical ears from people in the media familiar with the issue–and reflecting more on its initiators than on its targets–as the ACLI decision to distance itself from the effort confirms."

Arthur D. Postal