Insurance News Net is reporting that on Thursday, that Congressman Ed Royce (R-Calif.) and the National Association of Insurance and Financial Advisors (NAIFA) will give due attention to the insurance regulatory system.

The National Insurance Act of 2006 would allow life and property-casualty insurers and their agents to choose whether they want to be regulated by the federal government, or remain in the state system. The concept, reports INN, is known as the "optional federal charter". INN also notes that the bill will likely piggyback on the Senate's own National Insurance Act of 2006, which was introduced by Senators Sununu (R-N.H.) and Johnson (D-S.D.) in April.

NAIFA Chief Executive Officer, David Woods, had this to say about the bill:

The regulation of insurance is an important matter to consumers as well as producers, and deserves the attention it has received by Congress. In many respects the current system is in need of improvement. For years NAIFA has worked closely with states and the National Association of Insurance Commissioners [NAIC] to modernize state laws so consumers can gain access to the latest products in the marketplace, and agents can best serve their clients.

Furthermore, NAIFA continues to work with NAIC to improve and streamline speed-to-market conditions for life insurance products, including annuities, disability and long-term care coverage. Known as the Interstate Compact Commission, the new system establishes a "single point of contact" to review products. Previously, each state had to approve a product before it could be sold in that state. The compact, which had to be adopted by 26 states to become fully operational, took effect in May of this year.

Insurance regulation doesn't exactly rock my socks off, but this is all pretty encouraging stuff if you ask me. We have seen a bit of state/federal discourse on the InsureMe blogs before, both at the Agent blog and the Insurance blog [see comments] in the past.

Pointedly, InsureMe CEO (and insurance agent), Tim McTavish said that he'd like to see all lines of insurance regulated by the federal government. "[T]here seems to be a lot of unnecessary bureaucracy in each state doing similar functions of insurance administration," Tim said.

I'm inclined to agree. It seems there has been a need for some time to streamline the country's insurance regulation without forcing each state to give up complete control. Perhaps this "optional federal charter" will be the solution. Or at least a step in the right direction.

Check out the full, acronym-laden article over at INN here, and let us know what you think about the new bill.

[UPDATE 10.02.2006]: The Independent Insurance Agents and Brokers of America's [The "Big I"] opposition to Royce's proposed bill.

From Thomas Minkler, chairman of the Big I's Government Affairs Committee:

"We are long overdue for change, the existing system is slow, inefficient, unnecessarily complicated and expensive. That said, a one-size-fits-all scheme that creates a new federal bureaucracy is not the answer."

One of the long-standing beliefs of the Big I is that local insurance regulation is better for the consumer—that the level of responsiveness at the federal level just wouldn't be up to snuff. Touché, Big I. Touché.