Past Chairman of CIAB Calls for Regulatory Reforms to Improve Competitiveness of Insurance Industry.

Business Editors

WASHINGTON--(BUSINESS WIRE)--March 31, 2004

A past chairman of the Council of Insurance Agents & Brokers told a House subcommittee today that Congress needs to take action to remove the burden of multiple state regulatory requirements on insurance brokers and carriers in the interest of long-term viability of the industry.

Albert R. Counselman, CPCU, president and CEO of Riggs, Counselman, Michaels and Downes insurance brokerage in Baltimore, MD, testified at a hearing of the House Financial Services Subcommittee on Capital Markets, Insurance and Government- Sponsored Enterprises.

The council represents the largest commercial insurance brokers in the nation. Its members annually write 80 percent of all commercial property/casualty premiums and administer billions of dollars in employee benefits accounts.

Counselman said the road map to insurance regulatory reform introduced by Subcommittee Chairman Richard Baker, R-La., and House Banking Committee Chairman Michael Oxley, R-Ohio, is a critical step in "providing desperately needed modernization in insurance regulation."

Although the National Association of Insurance Commissioners "has attempted efforts to lead reform without federal involvement, the reality is that today's marketplace demands far more dramatic action," Counselman said. "The pace of financial services convergence and globalization are far outstripping the pace of individual reform efforts by state regulators and legislators."

As the insurance industry moves to a more global orientation, Counselman said, the inconsistencies and inefficiencies in the current state regulatory system are making the insurance sector less competitive than other providers of financial services sectors.

"Relief is needed, and it is needed now," he told the lawmakers. "The council believes it is critical to the long-term viability of the U.S. insurance industry that Congress pass legislation to address the deficiencies of the state insurance regulatory system."

In addition to the sweeping reform agenda outlined in the Oxley/Baker roadmap, Counselman told the House committee there are some relatively simple steps that could be taken to provide immediate and much-needed relief in the regulatory area. They are:

-- Extending the NARAB provisions included in the Gramm-Leach-

Bliley law calling for uniform agent and broker licensure laws

or reciprocal laws on broker licensing to all 50 states.

Although the majority of states have met the reciprocity 

provisions of NARAB, there still is deviation in the

individual state statutes, and two of the largest states in

terms of insurance premiums written - California and Florida

-- have not adopted the provisions. "Areas that would be good

candidates for uniformity standards include the agent

appointment process, continuing education and pre-licensing

education requirements and criminal history reviews,"

Counselman said, as well as license tenure and renewal dates.

-- Improving the "speed to market" capability of insurance

companies so they can offer new products in a timely manner

and be flexible enough to meet the needs of a changing

marketplace. Although more than a dozen states have eliminated

these requirements altogether, many more require prior

approval or the filing of rates and policy forms with state

regulators before changes can be made. This "prescriptive"

approach leads to duplication and over-regulation, Counselman

said, and means it may take two years for a new product to be

approved for sale on a nationwide basis. "This lag time for

the introduction of new insurance products is unacceptable,

and it is increasingly putting the insurance industry at a

competitive disadvantage as well as undermining the ability of

insurance consumers to access products that they want and

need," he said. Counselman said the council supports complete

deregulation of rates and forms for commercial lines of

insurance.

-- Increasing access to alternative markets. Counselman said that

although the purchase of surplus lines products is perfectly

legal in every state, the regulatory structure that governs

that coverage "is a morass," making compliance difficult if

not impossible. "My hope is that Congress can act to alleviate

these problems by creating incentives or requirements for the

states to rationalize their irrational surplus lines

requirements," he said. Counselman also urged lawmakers to

allow risk retention groups to provide coverage for property

damage as well as liability exposures. "This would provide

another alternative for businesses seeking economical

insurance solutions in difficult economic times for the

insurance industry," he said.

The Council of Insurance Agents & Brokers is the voice of the market leaders and the premier association for commercial insurance and employee benefits intermediaries in the United States and abroad. From its headquarters in Washington, DC - with programs conducted throughout the nation and world -- the council represents the largest, most productive, and most profitable of all commercial insurance agencies and brokerage firms. Only the top one percent of all agents and brokers qualify. The Council's members in more than 3,000 locations, place 80 percent -- well over $90 billion -- of all U.S. insurance products and services protecting business, industry, government and the public at-large, and they administer billions of dollars in employee benefits. Since 1913, the Council of Insurance Agents & Brokers has worked in the best interests of its members, securing innovative solutions and creating new market opportunities at home and abroad.