[Congressional Record Volume 140, Number 134 (Thursday, September 22, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 22, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
     INTRODUCTION OF THE INSURANCE SALES AND UNDERWRITING CONSUMER 
                         PROTECTION ACT OF 1994

                                 ______


                          HON. JOHN D. DINGELL

                              of michigan

                    in the house of representatives

                      Thursday, September 22, 1994

  Mr. DINGELL. Mr. Speaker, today I am introducing the ``Insurance 
Sales and Underwriting Consumer Protection Act of 1994.'' Joining me in 
introducing this bill is Chairwoman Cardiss Collins, who chairs the 
Energy and Commerce Subcommittee on Commerce, Consumer Protection, and 
Competitiveness.
  This legislation requires that anyone who provides insurance, whether 
or not they are an insurance agent or company, will have to comply with 
the same State consumer protections imposed on those in the business of 
insurance.
  It may seem unnecessary to have a Federal law saying that those in 
the insurance business must comply with State insurance laws, but I 
assure my colleagues that it is very necessary. Hearings in the Energy 
and Commerce Committee, in both its Oversight and Investigations 
Subcommittee and its Commerce, Consumer Protection, and Competitiveness 
Subcommittee, as well as recent actions of the Comptroller of the 
Currency, demonstrate that this legislation is sorely needed.
  First, during Energy and Commerce oversight hearings on the problems 
faced by financial services providers as a result of savings and loan 
failures, we discovered that a number of failed savings and loans had 
sold insurance products to their customers, and that they had done so 
without disclosing to these customers that the insurance products were 
not insured by the Federal Government. When the savings and loans 
failed--and the insurance company that had underwritten many of these 
policies also failed--customers were stunned to discover that the FDIC 
did not cover their insurance. As a result, they suffered both 
emotional and financial losses.
  A second example became evident in the aftermath of the Los Angeles 
riots following the Rodney King trial. Many of the small business 
people devastated by the riots claims with their insurance companies, 
only to find out that these companies had violated California law by 
selling insurance in California without authorization. Many of these 
companies would not or could not pay these valid claims. Many of these 
businesses were forced to close and others suffered extreme 
financial difficulties because the ``insurance'' they purchased was no 
insurance at all.

  Finally, there is the so-called retirement CD. This is a product 
offered by the Blackfeet National Bank which is designed to obtain FDIC 
insurance protection for an annuity, that is, insurance, product. The 
promoters of this product have described it as free from taxes on 
inside buildup, as is true of life insurance; as insured by the FDIC; 
and as free from all State insurance regulation, whether these 
regulations apply to underwriting financial requirements to protect the 
safety and soundness of the bank or to consumers protection 
requirements. The Comptroller of the Currency has approved this product 
for bank sales subject to certain conditions, and appears to agree with 
the idea that Federal banking laws preempt State insurance laws, and 
that banks may provide insurance. Not only is it absolutely clear that 
Congress has never preempted States insurance laws as to banks 
providing insurance, it is also a clear misreading of the laws Congress 
has passed. The National Bank Act has been interpreted to prohibit 
national banks from engaging in the business of insurance. In addition, 
the Glass-Steagall Act prohibits banks from engaging in commerce.
  It is well known that the Energy and Commerce Committee has had many 
hearings on the inadequacy of the current State insurance regulatory 
system, and that I believe that there should be Federal regulation of 
this interstate and international industry. At the same time, Federal 
regulation has not yet been established. The State insurance regulatory 
system is all that currently exists to protect insurance consumers and 
to ensure the financial stability and safe operations of insurance 
providers. I believe that it is imperative, for the protection of 
consumers, and to ensure the financial soundness of the insurance 
products, that at the very least the existing State insurance standards 
and protections are met by anyone selling or underwiring insurance, 
whether they are a bank, foreign company, or insurance company.
  The bill I am introducing today does not impose any new substantive 
requirements on anyone who provides insurance. It simply says that if 
you provide insurance in interstate commerce, regardless of who you 
are, you must comply with the insurance sales, licensing, and financial 
requirements of the State in which you are providing the insurance. If 
you violate these requirements, and the State does not or for some 
reason cannot enforce these requirements, the Department of Justice is 
authorized to bring a civil action to stop you from continuing to 
provide insurance and to fine you for violating those States 
requirements. The bill contemplates that the State insurance regulators 
will remain the primary, frontline regulators in their own States, with 
the Federal Government in a backup role. This avoids dual regulation.
  There is an urgent need for this bill to be introduced today, even 
though it is very near the end of the legislative session. We need to 
give notice that we will act to protect consumers. This is particularly 
necessary as to the retirement CD which I have described. The promoters 
of this product and the Federal banking regulators appear to believe 
that their willful disregard of Federal statutes and congressional 
intent will allow the proliferation of the sales of this product--and 
will force Congress to allow the continued sale of this product even if 
Congress otherwise continues to prohibit banks from providing insurance 
simply because so many banks will be providing the product by the time 
we enact the legislation. This bill sends a very clear message to these 
promoters and to the banking regulators that anyone marketing this 
product does so at its own peril.

  This is a simple bill and a simple concept, if you enter the 
insurance business, you must follow State insurance laws. These State 
laws are the minimums needed to ensure that consumers are protected and 
that those underwriting insurance are adequately and safely financed 
and invested.
  I urge my colleagues to support this legislation.

                          ____________________