We may be getting a very early sign that our fight against federal regulation of insurance is beginning to have the desired effect.

Recently Rep. Barney Frank, Chairman of the House Financial Services Committee, said that his committee could work on creating a federal regulatory option for life insurers before working on making that option available to property-casualty insurers. Frank said that while no final decision has been made about how the committee will handle the so-called “optional” federal charter issue, proposals to include property-casualty insurers in an OFC have proven to be more controversial than an OFC just for life insurers.

For years, conventional wisdom in the industry held that an OFC for insurers could only be achieved if it were confined to life insurers. But as the current push for an OFC moved into high gear, supporters apparently decided to “go for broke” by including property-casualty in their proposals.

At various times before this shift in strategy occurred, congressional leaders such as Rep. Frank and Rep. Paul Kanjorski (D-Pa.), chairman of the Financial Services Committee’s Capital Markets Subcommittee, had indicated that the only real chance an OFC proposal had was if it applied just to the life sector.

At the time, we were a bit surprised that the forces backing an OFC had decided to ignore the political realities and go for an industry-wide OFC. Fortunately for the supporters of state insurance regulation such as PIA, this strategy appears to have backfired.

Support for OFC Eroding

There were two very strong indications in the fall of 2007 that the concerted push for a comprehensive OFC had run up against a wall. Both involved the top players in the House on this issue, Reps. Frank and Kanjorski.

On October 3, Rep. Kanjorski held a hearing entitled The Need for Insurance Regulatory Reform. It was during that hearing that supporters of federal insurance regulation heard clear indications that their arguments were failing to persuade. Kanjorski said that he still has mixed feelings about the concept of an optional federal charter and hadn’t made up his mind.

“I have no battle plan, no axe to grind, and am open to considering all points of view,” he said. “I may have inclinations toward pursuing certain reforms, but I have made no final decisions about how to implement such reforms and how to build a broad consensus that garners the support of many, not just a slim majority.”

The Pennsylvania lawmaker then indicated he was in no hurry. “The imposition of the federal government in some form into an area traditionally regulated by the states has enormous implications for insurers, businesses, and consumers. Therefore, we should not rush ourselves into considering reform legislation,” Kanjorski said.

At one point in the hearing Rep. Kanjorski said, “Perhaps an optional federal charter for insurance is a solution in search of a problem.” Consensus about the shape of reform was lacking on the subcommittee, as well. Kanjorski plans to hold several hearings this year on OFC proposals.

In January, Rep. Frank came out with his statements indicating an openness to working on a life-only OFC. This sent a strong signal to not only subcommittee chairman Kanjorski, but told advocates of an OFC that their ambitious strategy for an industry-wide charter may have to be curtailed.

An effective committee chairman must always have finely tuned political radar, and Chairman Frank certainly does. He realizes that the opposition to a broad proposal may be too intense. One of the reasons is the effective campaign against optional federal charters that has been ongoing by PIA.

“No major change will come in the insurance laws of this country over the objections of insurance agents,” declared Rep. Frank during a speech in November. “Insurance agents are the most influential group within the property-casualty industry…They are not only numerous, but they are an outgoing culture…[they] are extremely active and influential from a political grass-roots standpoint in their communities.”

PIA Remains Steadfast

The fight against federal regulation of insurance is being led by insurance agents — with PIA in the lead, providing firm, vocal, steadfast and, when needed, strident opposition. The result: we have demonstrated to all concerned that our industry is sharply divided on proposals for an optional federal charter.

Whether or not committees in the House or Senate take up proposals for optional federal charters that include just life insurers, or life as well as property-casualty, is immaterial — our opposition to OFC is resolute.

PIA’s battle against federal insurance encroachment is far from over, but it is reassuring to know that our efforts to date are starting to have the intended effect.

This article originally appeared in the Feburary 2008 issue of PIA Connection.