In his op-ed "The Forgotten Financial Sector" (April 16), Rep. Ed Royce laments that the states have sole regulatory authority of insurance. The implication is this authority should be centralized with our federal government. Mr. Royce unfortunately proves that there really are no fundamental differences between Republicans and Democrats as both continually seek to gather power at the federal level. The citizens of the various states, however, continue to be distracted by national political arguments between the parties while missing the real issue of federal usurpation of the states' governmental authority.
David Wilson
Greenville, S.C.
The degree of regulation of the industry, by the 51 state insurance departments, ranges from strict to almost non-existent. There are many insurers that choose to be lightly regulated, and they simply avoid operating in the states that regulate the industry closely.
In spite of the compelling logic for central regulation, it is unlikely to ever happen. Each state levies a premium tax on the insurers, based on the premium that is collected, in their state. Almost none of the premium tax is used for regulatory purposes, but goes directly into the state revenue stream.
The states will fight like feral animals to protect this silent tax.
William Stephenson
Princeton, N.J.
Insurers face increasing competition from financial institutions for products the insurers alone once provided. The 50-state regulatory model has put the insurance industry at a decided disadvantage. Rep. Royce calls for passage of the optional federal charter (OFC).
The OFC levels the playing field, modernizing the insurance industry and allowing it to be competitive both domestically and globally. In our recent 50-state study of property and casualty insurance regulation, we found that the availability and quality of insurance products improved most when regulatory barriers to entry and competition were reduced. Consumers in Illinois and Vermont -- two states that encourage competition and don't attempt to manipulate the insurance market -- benefit from having access to more insurance providers than any other states.
Matthew Glans
The Heartland Institute
Chicago
As an independent agent operating out of Southern California, I am locked out of the insurance markets in the other 49 states due to individual state licensing requirements. This gives the large national brokers a major edge on the small agents who don't have the resources to expend to obtain national licenses. We are further constrained regarding the use of major insurance markets that are not admitted in California. We must go through an intermediary to do business with these important sources, which takes time, money and increased administration expenses. It would be ideal if the feds could license brokers nationally and allow us direct access to any carrier who might be licensed in the same manner.
Regarding the national licensing of carriers, it must be recognized that the various states have statutes and case law that materially affect the placement of business, particularly liability business, within the affected state. Any regulation at the federal level should give the carriers the leeway to accept or reject business in a particular state or amend their pricing or coverage forms to mitigate undue risks within a particular state.
Robert G. Mahan, Esq.
Irvine, Calif.
Mr. Royce suggests that insurers could bring new products to market more swiftly if they required approval from just one federal regulator instead of 51 state regulators. But the product approval process at federal regulatory agencies, such as