The late, great Sen. Everett Dirksen, R-ILL., he of the “a billion here, A billion there, before long you’re talking real money” fame, had a piece of wisdom that I try to live by as a lobbyist. “I am a man of fixed and unbending principles,” Dirksen said, “the first of which is to be flexible at all times.”
Eons ago, I began my insurance lobbying career as a crusader against the evil banks getting into the insurance sales business. With three straight Supreme Court decisions to the contrary, I got with the program. If anything, the banks’ entry into the business has been nothing but good in driving up the price and value of brokerages. As one banker told me, “You guys fought us so hard and for so long, we thought there must be money there.”
Now we come to the issue of the Optional Federal Charter. Ever since the inquisition of Rep. John Dingell, D-Mich., into the solvency of the insurance industry in 1992, I have steadfastly articulated support for the OFC. After all, if any sane person were to construct insurance regulation from scratch, knowing all of its interstate and global entanglements, would it be done state by state?
The OFC legislation has never come close to enactment. And the reality is that, in today’s political environment, there are far more risks than benefits to advancing it. The devil we know is better than the one that might be awaiting us.
In short, I’ve gone wobbly. Or, better, “flexible.”
Dingell’s solvency investigation produced a couple of brilliant, damning and bipartisan reports about some early-’90s insurers gone bust while state regulators were asleep at the switch and had little interstate cooperation. For the better part of two years, Dingell’s able staff worked to create a federal alternative for insurers (and producers, for that matter). Few people remember that, although Dingell introduced the legislation, he never moved it to even a subcommittee vote. In the nearly 20 years since, the OFC legislation has been discussed and debated, but never once has it been voted upon in either chamber of Congress.
In many instances, I think the opponents of the OFC over-killed it, something that’s great sport among Washington lobbyists. Scare your constituents into believing they’re in grave danger if a bill passes, then claim victory when it goes nowhere.
The OFC opponents carried out political retribution against members of Congress who dared to support the legislation. When a hapless freshman congressman from Idaho signed on as a co-sponsor of the legislation two years ago, OFC critics went for his head and got it: He was defeated for re-election last fall. Likewise, the lead Democratic sponsor of the bill during the last couple of sessions of Congress, Rep. Melissa Bean of Illinois, was narrowly defeated for re-election. Were their defeats due to obscure insurance regulatory legislation? Not really, but their support for it didn’t help.
When Republicans took control of Congress in the mid-1990s, the legislation went moribund. Then-Chairman Mike Oxley, R-Ohio, of the Financial Services Committee, joined by Insurance Subcommittee Chairman Richard Baker, R-La., tried to split the differences in the industry by introducing the State Modernization and Regulatory Transparency (SMART) Act, which would have more carefully preempted only certain areas of state authority. We at The Council have always been progressively minded on these regulatory modernization initiatives, so we strongly supported the SMART Act.
But proponents of unfettered state insurance authority pounded away at the bill. I’ll never forget being summoned, along with about 10 other lobbyists from organizations that supported the SMART Act, to meet with Oxley and Baker. Oxley was in a bad mood. “We’re lower than whale dung,” was his most memorable line of the day, except he didn’t say dung. We weren’t able to bail it out.
Has all this been a wasted effort? Absolutely not. One of the reasons the first OFC initiative never got traction was because the states and the National Association of Insurance Commissioners launched an aggressive solvency accreditation process in response. One of the original sections of the Dingell bill was the NARAB (National Association of Registered Agents and Brokers) title. Interstate licensing reforms through NARAB were partially achieved in the Gramm-Leach-Bliley Act of 1999.
Even independent insurance agents strongly support NARAB now. The surplus lines reform law, which kicks in July 21, also had its origin in the SMART Act.
In our view, the OFC is mostly an exercise in very warranted deregulation. But in the aftermath of the financial meltdown, neither Congress nor this administration is in a mood to deregulate anything. Such a debate would more likely result in an overlay of federal regulation on top of state oversight—the worst of both worlds. The debates appear likely to go on, and I look forward to getting my kids, now 10 and 13, through college on this one.