In early April, Senators John Sununu (R-N.H.) and Sen. TimJohnson (D-S.D.) introduced a bill that would establish a federalprogram of insurance regulation that would operate in conjunctionwith the current state-based system.

Specifically, the act seeks to create a system of federalchartering, licensing, regulation, and supervision for insurers andinsurance producers that is independent of the existing statesystem of insurance licensing, regulation, and supervision. Also,it would create a new government agency called the Office ofNational Insurance that would be funded by assessments imposed uponthe insurance industry and would be led by a commissioner ofnational insurance.

The bill's introduction caused a stir in the industry. TheIndependent Insurance Agents and Brokers of America opposed thebill, claiming that the state system is more responsive andadditional regulatory measures would overburden their members andunnecessarily impinge upon states' rights. Instead, the group isbacking the State Modernization and Regulatory Transparency (SMART)Act, which they say would improve and modernize the existing systemwithout creating another bureaucracy.

The National Association of Insurance Commissioners alsoexpressed negative opinions about the program.

“The nation's state insurance officials share significantconcern that this bifurcated regulatory regime with redundant,overlapping responsibilities will result in policyholder confusion,market uncertainty, and a host of other unintended consequencesthat will harm taxpaying individuals, families and businesses,”said NAIC president Alessandro Iuppa. “When our record of successis measured against the uncertainties of changing a state-basedsystem that works well at no cost to the federal government, webelieve Congress will agree that regulating insurance is best leftto home state officials who have the expertise, resources, andexperience to protect consumers in the communities where theylive.”

Other associations that opposed the legislation included theNational Association of Mutual Insurance Companies and the PropertyCasualty Insurers Association of America.

The American Insurance Association bucked the opposition trend,saying that the streamlined, rational regulatory system called forin the legislation would result in increased efficiency, morechoices, and enhanced convenience for consumers. It went on to saythat the state regulatory system would still be preserved and thatinsurers wishing to remain state-regulated could do so.

“AIA will work with Senators Sununu and Johnson, and othermembers of Congress to help show how much this legislation benefitsthe U.S. economy and consumers alike by creating a market-basedinsurance regulatory system,” said AIA president Mark Racicot.