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Insurance regulation is broken, needs fixing


BRINGING INSURANCE REGULATION into the 21st century is the goal of Rep. Ed Royce, R-Calif., who wants to allow insurers and producers to choose new optional federal charters in place of the current mandatory state charters.

By announcing his intention to introduce OFC legislation in the House at the annual Risk & Insurance Management Society Inc.'s RIMS on the Hill legislative meeting last week, Rep. Royce was in some ways preaching to the choir. RIMS has long supported the OFC, and understandably so. Allowing insurers and brokers to choose one regulator rather than dozens cannot help but encourage competition, innovation and efficiency, both domestically and internationally.

In fact, backers of an OFC bill that's already been introduced in the Senate have made just those points.

Rep. Royce made a telling comment in noting that the current "Balkanized" insurance marketplace somewhat resembles that created by the Articles of Confederation, which allowed the states to govern all economic transactions. States interfered with each other's commerce, something the Founding Fathers found so intolerable that they made sure the new Constitution contained the Commerce Clause specifically forbidding such meddling.

That was an 18th century solution to an 18th century problem. Unfortunately, vestiges of that pre-Commerce Clause thinking are alive and well in insurance regulation. It's well past time to bring insurance regulation into the 21st century by approving OFC legislation, with all due haste.