billions of dollars
US insurers and insurance industry bodies lobbying for approval of
legislation that would permit insurers to choose between existing
state regulation or a new optional federal charter (OFC) have
received a significant boost from a study authored by Laureen
Regan, associate professor with Temple University’s Fox School of
Business and Management. The boost comes where it probably counts
most: an indication of huge cost savings an OFC would bring.
According to Regan, savings in producer licensing costs associated
with moving to an OFC from the current system of exclusive state
regulation could range from $268 million to $377 million annually.
She explained that her calculation of cost savings was based on
data from the National Association of Insurance Commissioners
showing that there were 4.31 million insurance producer licences
held in 2004 across all lines of insurance. On average, each
insurance producer holds 7.9 separate licences.
Regan added that with costs of $100 per licence per year, the total
direct cost of insurance licensing per year is $431.73 million.
Under a uniform licensing system with a single licence covering all
states and lines of business, which an optional federal charter
would introduce, she maintained, insurance producer licensing costs
could decline to $54.39 million – representing a saving of $377.34
Frank Keating, president and CEO of the American Council of Life
Insurers (ACLI), said: “All the objective evidence points strongly
in favour of an OFC.”
Keating added that an earlier study by University of Georgia
professor Steven Pottier found that life insurers could save up to
$5.7 billion annually in compliance costs under an OFC system.
“Now, professor Regan’s analysis shows that life insurance
producers would also realise substantial savings,” he said.
Regan’s study was commissioned by the ACLI.