Orange County Congressman Ed Royce showcases his policy acumen today, with a piece in DC's The Hill newspaper, outlining his proposal for an Optional Federal Charter for certain insurance providers.  He's promoting this concept with legislation dubbed the National Insurance Act.

Congressman Royce built a reputation as a studied and thoughtful policy maker, and this bill is no exception.  While its implications may seem obscure to some, its impact will be widely felt in the insurance and financial services industries and will likely have a direct impact on the price of coverage paid by consumers.

Royce outlines two issues among the key justifications for the legislation: lack of a clear and compelling federal standard for insurance oversight, and what he might consider (I'm reading into his writing somewhat) an overly burdensome state regulatory structure under California's elected insurance commissioner.  The net effect, is that insurance companies are regulated to one set of standards in California and another elsewhere.   

Further, he makes a compelling case for elevating a national insurance regulator to an independent, quasi-independent role similar to the  monetary policy oversight provided by the Office of  Comptroller of the Currency and the Federal Reserve.

In practice, his proposal makes some sense, and he argues -- correctly -- that a bifurcated state-federal regulatory structure works well for banks, and would likewise provide similar benefits to the insurance community.  Because most insurance companies issue policies nationwide, Royce believes there is a compelling Constitutional argument for guaranteeing that interstate commerce is uniform and not adversely affected by regulations that vary from state to state, some exceedingly onerous compared to others.

Having just completed a (successful) life insurance physical exam, and reviewing the myriad -- many very costly -- options to provide adequate coverage for a family, any move to make adequate insurance coverage more efficient and cost effective is welcome.  Sidebar: most insurance brokers recommend between 10 and 20 times your family's annual income as a baseline for total policy coverage.  Especially in California and other expensive markets, this type of coverage is valuable, yet expensive.

This is a bill that will be watched and worked by many in OC, likely touching the business of Newport Beach Pacific Life Insurance Company, among others.  OC Republican Representatives John Campbell and Gary Miller join Royce on the House Financial Services Committee where this bill will see action.

You can read the congressman's op-ed column here.