For years the insurance industry has fought on Capitol Hill for an optional federal charter for insurance agents, as opposed to the piecemeal state-based system that has existed for a century. Now with the proposed creation of the Consumer Financial Protection Agency (CFPA) looming on the agenda, some national oversight of insurance appears likely.

Speaking at the American Bankers Insurance Association (ABIA) in Washington, D.C., last week, combatants on all sides seem to agree that insurance licensing rules should apply uniformly and that local enforcement is the most practical way of policing those laws.

In a spirited panel discussion, Robert Damron, the Kentucky delegate of the National Conference of Insurance Legislators; Travis Plunkett, legislative director of the Consumer Federation of America; Alan Liebowitz, president of law firm Omnia; Ethan Sonnichen, government relations director of the National Association of Insurance Commissioners (NAIC); James McIntyre, ABIA’s outside counsel and Keven McKechnie, ABIA’s executive director squared off about how the insurance regulation of the future should look.

As Matthew Saxe, a conference attendee who works in compliance and risk for M&T’s property and casualty operation in Buffalo, N.Y., commented afterward, “Everyone is looking for the same thing—better regulation—but everyone has their own idea of how to get there.”

Insurance companies champion the optional federal charter, which would allow them to select whether to follow national or state-dictated rules. Many insurance firms have a national footprint, and, they argue, the cost of keeping their agents licensed in every state is costly and inefficient. “It’s no longer a local problem, it’s a national one,” said McIntyre. “Companies doing insurance nationally are at a disadvantage, which increases costs for consumers too. We want uniformity because it’s more efficient and user-friendly for insurance companies and that benefits consumers” in terms of price.

Meanwhile, state regulators worry that a federal charter would both water down their current regulations in the name of uniformity and prevent individual states from adding requirements that protect the interests of their specific constituents. They say that allowing insurance firms to opt out of their rules and restrictions would lead to “charter shopping,” Damron said, where insurance firms would simply adopt the least onerous—and presumably more lax—compliance standards. “We’re looking at national licensing and working together,” Damron says. “People are concerned about Congress taking too much control, which is why the states are a better option.”

The proposed agency is also a terrifying thought for state legislators, who fear that their power to make laws about insurance will be taken away. In response, they are forming “compacts,” the most powerful of which now consists of 37 states and counting.  

Finally, consumer groups argue that insurance regulation needs a complete overhaul because it doesn’t work. Individual state regulation has failed to stop widespread abuse because the states are only responsible for their own turf. Consumer groups support the proposed Consumer Financial Protection Agency, even though its oversight would be limited to mortgage-linked insurance products. These groups would like to see that oversight expanded to other products. They argue that the strong arm of an enraged Congress should sweep aside the corroded insurance laws and to take to task insurance companies for past abuses.

“Congress wants one consumer agency that prevents charter-based shopping around,” says Plunkett, who supports local regulation. “States that are doing a good job have nothing to fear.”

One thing the panelists did agree on was that the current system was no longer sufficient to meet the needs of a complex financial market. As for who’s going to fix it, Keven McKechnie, executive director for ABIA, urged conference attendees to take an active role now in the fight to control insurance regulation.