Enormous debate has erupted around the idea of optional federal chartering for insurance companies.
Groups on both sides of the issue have offered numerous arguments for and against the concept. Proponents promise a freer, more open market for insurance that would benefit consumers and the economy. Opponents, on the other hand, believe that a new federal regulator will impose burdensome bureaucratic rules, squelch competition, and needlessly increase federal power. This website functions as a resource for news and frequently asked questions about the Optional Federal Charter.
This website provides a free market perspective on the idea of optional federal insurance chartering. Two very similar National Insurance Act bills proposed in the House (H.R. 3200) and Senate (S. 40) during the 110th Congress (2007-2008) would have created a new national insurance regulator, setting up a system known as an Optional Federal Charter (OFC). Neither bill received a floor vote but both attracted significant interest.
An OFC would let insurers organize themselves under either federal or state law.
Currently, insurers operating in a given state must operate under that state’s insurance laws. A federally chartered insurance company would have to obey all general state business regulations, but would work under a new federal bureau, which would enforce the same insurance-specific laws throughout the country. Federally chartered insurance companies would sell commercial, homeowners’, life, and auto insurance, but not health insurance.
The proposals before Congress would set up new national mechanisms to protect consumers against insurance fraud and to ensure federally chartered insurers’ solvency.
The proposed House and Senate bills contain no mechanisms to let government set rates. However, 49 states do have Rate regulation laws and much of the controversy over these bills stems from the fact that OFC would eliminate these controls.
