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Washington, D.C., Oct. 2, 2007— The Senate banking committee this week will examine the possibilities for reform of the nation’s insurance system. A new report from the Competitive Enterprise Institute examines one proposal for significant change: an optional federal charter (OFC). <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
An OFC would let insurance companies do what banks have done since the Civil War and subject themselves to federal rather than state regulation. Currently, insurance companies wishing to market a product nationally must go through separate regulatory processes in all 50 states and the District of Columbia. This system has brought insurance innovation to a standstill, explains the report.
“Since insurers introduced modern homeowners’ insurance in 1959, the industry has not introduced a single entirely new property and casualty insurance product for individual customers,” writes CEI Senior Fellow Eli Lehrer in Optional Federal Charter for Insurers: FAQ. 
“Quite simply, there is no current “system” to criticize but, rather, 50 separate state systems plus a separate system for the District of Columbia,” writes Lehrer. “Some states do have insurance regulation systems that seem to do a decent job at serving customers and insurers alike. But others do not.”
The report provides a free market perspective on the idea of optional federal insurance chartering, with a focus on two similar National Insurance Act bills now before the House (H.R. 3200) and Senate (S. 40). The bills seek to create a new national insurance regulator, setting up a system known as an Optional Federal Charter (OFC).
“An OFC can’t do everything,” says Lehrer. “But, if it’s structured properly, it could be a step in the right direction.”
Eli Lehrer Bio