Breaking New Regulatory Ground in Ohio
January 26, 2012On Tuesday, January 24, I testified on behalf of the American Fraternal Alliance before the Ohio House Insurance Committee in support of HB 341. This bill is sponsored by the Ohio Department of Insurance (ODI) and was developed by ODI in conjunction with a Task Force of representatives from a cross-section of Ohio-domiciled Alliance member societies. The bill would establish a variety of new solvency regulations for fraternal life insurers, including requirements that fraternals meet the same Risk-Based Capital and minimum surplus standards that commercial life insurers must meet. The legislation also includes guaranty fund disclosure notice requirements and assessment notice requirements that are not currently on the books in Ohio or any other state. As such, the bill has the potential to set new standards for fraternal solvency regulation on a national basis. The Alliance Board of Director’s decision to support this groundbreaking legislation was well-thought-out and courageous – not every member society (and not even every member of the Board) agreed with every provision of HB 341 and some societies were downright opposed to the entire legislation. The Board considered all these factors before coming out in support of the bill late in 2011, and the Alliance’s support was based on the fact that enactment of the legislation, over the long-term, would enhance the financial strength and reputational integrity of the entire fraternal system, and better protect the increasingly more sophisticated purchasers of fraternal financial services from potential insolvencies. In most cases, business trade groups lobby for legislation that preserves existing regulatory exemptions or repeals regulations that it feels are burdensome or unnecessary. So the notion of testifying before a legislative committee on a bill that imposes higher regulatory standards may seem a little incongruous. Not only do you risk being cross-examined by legislators wondering if you have an ulterior motive for supporting the proposal, but there is also the risk that you may be on the opposite side of the issue from some of the members of your organization. Confident that the Alliance’s logic for supporting the measure was sound, I did my best to represent the entire fraternal system (a few representatives of which were in the audience). Following my testimony, I answered about 20 minutes of questions from committee members looking to gain insight on the potential impact of the legislation – on job losses and creation that may result from mergers and acquisitions, on the need for tougher solvency regulations given the infrequency of fraternal insurer insolvencies, on the price that consumers may pay for life insurance policies, and on the exemption of fraternal life insurers from participation in the state guaranty fund. I responded to each question as patiently and thoroughly as I could, and the result, I hope, will be passage of the bill by the Committee sometime next week. Early indications are that it has widespread support among the members. The bill will then go to the full House for approval, and then move to the Senate to undergo the same process – consideration by the Insurance Committee and then the full chamber. HB 341 should arrive on the Governor’s desk this summer. If signed, some provisions would become effective on January 1, 2013, while others would be postponed for up to two years. The Alliance will keep members posted on the bill’s progress through our regular legislative bulletins and blog postings. I think it’s important that every member society understand why the Alliance Board of Directors supports the bill, which is spelled out clearly in the testimony I delivered to Ohio legislators. Here’s a link to it for your review. I hope you’ll take a few minutes to read it, and I welcome your feedback, either through comments to the blog or via email to me at email@example.com.