Insurance Bill Provides for Consumers a Less Costly Insurance Alternative (Rep. Ed Royce)

I have partnered with Congresswoman Melissa Bean (D-Ill.) to introduce the first bipartisan House version of the National Insurance Act. The bill is companion legislation to S.40, which was authored by Senators Sununu (R-N.H.) and Johnson (D-S.D.). The National Insurance Act of 2007 would create an optional federal charter (OFC) for life and property/casualty insurance providers. The OFC would serve to reduce regulatory obstacles to improving the cost of the delivery of insurance products to American consumers and businesses.

There is little argument that the current state-based regulatory system which oversees the insurance industry – which consists of a different regulator in each state – is outdated, burdensome, complicated, duplicative, and costly.

In part, the anticompetitive nature of the state-based regulatory system has led us to introduce the National Insurance Act (NIA), which would create an optional federal charter (OFC) for life and property/casualty insurance providers. Designed to mirror the regulatory structure found in the dual banking system, the NIA would provide the industry with a more effective regulatory alternative. Insurance providers could choose to be regulated at the state level or by the new federal regulator. Those insurers opting for federal regulation would be better able to serve insurance consumers across the United States – eliminating the need to engage in the tangled web of bureaucracy and duplicative regulation in each and every state.

What is becoming increasingly apparent is the mood of the marketplace. The debate now is not so much whether an optional federal charter should be implemented, but how and when. We believe that consumers will see immediate benefit and increased consumer protection under an optional federal charter. The NIA would create a Division of Consumer Protection which would protect against unfair and deceptive practices by insurance providers and agents for the advertising, sale and administration of insurance products. A Division of Insurance Fraud would also be created under our legislation, which would make insurance fraud a federal crime.