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Financial Service Subcommittee Considers Insurance Reform Proposals

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The U.S. House Financial Service Subcommittee held Part III of its
hearing on insurance regulation recently. The previous hearings were
held in October 2007 and focused on the need for insurance regulatory
reform. The purpose of the hearing was to consider a variety of state
and federal proposals on insurance reform. Currently, there are two
pending bills in Congress, H.R. 3200 and S. 40, titled the “National
Insurance Act of 2007.” These bills would create an optional federal
charter (OFC) and establish the Office of National Insurance
(ONI).           

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David Nason, assistant secretary for Financial Institutions, Department
of the Treasury, outlined the recently released “Blueprint for a
Modernized Financial Regulatory Structure” that was released by the
Treasury Department March 31. The blueprint was created after a
year-long effort working toward the modernization of all sectors of the
financial services industry. Nason said: “A number of reform proposals
have been considered over the years to modernize the U.S. system of
insurance regulation: total federal preemption, dual federal/state
systems under an optional federal charter approach, mandating national
standards on the state-based system, and harmonizing and making more
uniform regulation among the states. In the Treasury Department’s view,
the establishment of a dual federal/state system with an OFC provides
the best opportunity for the establishment of a modern and
comprehensive system of regulation.”           

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Alastair Shore, senior vice president and chief underwriter of CUNA
Mutual Group, presented on behalf of the American Council of Life
Insurance and the American Insurance Association. Shore focused on his
trade associations’ support of the Optional Federal Charter. According
to Shore, “The National Insurance Act is a strong consumer protection
bill, which focuses on a robust centralized system that emphasizes
safety, soundness and consistent market regulation. The consumer
protections are reinforced through separate consumer affairs and
insurance fraud divisions and a new federal ombudsman. Together, these
regulatory powers will create a presence that can more quickly respond
to consumers than the current, fragmented regulatory system.”          

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Other panel members presented testimony on behalf of the National
Association of Insurance Commissioners, the Self-Insurance Institute of
America, the Independent Insurance Agents and Brokers of America and
the Interstate Insurance Product Regulation Commission.           

To view H.R. 3200, click HERE. To view S. 40, click HERE.

To view the
blueprint, click HERE.

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