Consumers Would Receive Greater Access To Guaranteed Lifetime Income Stream Under Optional Federal Insurance Charter
October 3, 2007
Consumers in many states are denied the opportunity to buy highly valued retirement security products due to unnecessary state regulatory delays, according to Christopher M. (Kip) Condron, a member of the board of directors of the American Council of Life Insurers (ACLI) and chief executive officer of AXA Equitable.
These delays can undermine the ability of life insurers to offer consumers the guarantee of income for life, Condron testified today to the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises.
“We are in a unique position to help America deal with the retirement security crisis. Significantly, life insurers – and only life insurers – can convert retirement savings into a guaranteed lifetime stream of income. That capability may well be the most potent tool that the private sector possesses to address the retirement savings challenges this nation faces,” Condron testified to the subcommittee.
His comments were part of the first in a likely series of hearings on insurance regulation by the 110th Congress, which is considering legislation to create an optional federal charter for insurance companies and producers.
“The issue of insurance regulatory reform entails much more than merely enabling insurance companies to operate more efficiently,” Condron said. “It carries with it significant consumer consequences, consequences to the U.S. capital markets and the economy and, perhaps most importantly, it has a direct bearing on the looming retirement security crisis as some 78 million baby boomers near retirement.”
Condron testified that in addition to unnecessary delays, the current state-based regulatory system imposes unnecessary costs on all consumers—nearly $6 billion annually, according to an ACLI-commissioned study by University of Georgia Professor Steven Pottier. The state-by-state regulatory system is presently not meeting the needs of a highly mobile population, much of which is approaching retirement age, Condron said. American citizens are looking for new and innovative ways to assure that their retirement assets will last a lifetime and these needs do not change when they move from one state to another.
Certainly, the states are working hard to improve the system, he said.
“ACLI is actively engaged with, and fully supportive of, the initiative by the National Association of Insurance Commissioners to advance an interstate compact that will create a uniform mechanism for life insurance company product filings and approvals,” Condron said.
Indeed, ACLI is not looking to supplant state regulation. Rather, ACLI supports a dual-track approach, similar to the dual banking system, that ensures company solvency and consumer protection, promotes efficiency and accommodates the operational needs of a diverse industry, Condron said.
The availability of a federal option would encourage state regulators to be more responsive. Many life insurance companies may well choose to remain state-chartered, he said. At the same time, a federal insurance regulator would be a peer to other financial regulators in the critical Washington arena, Condron added.
Condron noted that before joining AXA, he was chief executive officer with Dreyfus, a securities firm. At Dreyfus, he could get a product to market in all states in less than 60 days with no state-by-state variations.
But in the insurance business, it takes closer to a year, and even then a new product won’t be approved in all states. Even where it is approved, it may have to be changed, in some cases fundamentally, to pass muster, Condron said.
“The stifling effect that this has on the kind of innovative product development that is critical to helping solve America’s retirement security crisis can’t be overstated,” Condron said. “And just think about the customer service and operations challenges it also creates.”
ACLI supports bipartisan legislation—The National Insurance Act, H.R. 3200—introduced by Reps. Melissa Bean (D-IL) and Ed Royce (R-CA) that would modernize insurance regulation by allowing insurance companies and producers to opt for uniform federal regulation. A similar bill—S. 40—has been introduced in the Senate by Sens. John Sununu (R-NH) and Tim Johnson (D-SD). The Senate bill is also called the National Insurance Act.