News Release-- August 02, 2005
NEW STUDY FINDS SIGNIFICANT COST SAVINGS UNDER OPTIONAL FEDERAL CHARTER FOR LIFE INSURANCE PROPOSAL
Washington, D.C., (August 2, 2005) – The American Council of Life Insurers (ACLI) and Computer Sciences Corporation (NYSE: CSC), a leading information technology firm, today released the results of a study that found a clear economic case for structural changes in insurance regulation that will benefit both consumers and life insurers.
The findings for the 18-month study are based on responses to questions about regulatory costs provided by more than 100 companies. In the aggregate, these companies are responsible for more than $160.2 billion in premiums and more than $1.5 trillion in assets within the U.S. life insurance market. The sample represents more than 41 percent of the U.S. life insurance market based on both premiums and assets.
Structural changes highlighted in the study were those drafted in the ACLI’s optional federal charter (OFC) proposal, which aims to give life insurance companies the choice of a new federal regulator or continued state regulation. ACLI believes an optional federal charter, based loosely on banks’ regulatory model of state and federal regulatory options, best addresses the needs of 21st century consumers and companies.
The study revealed several important points, including:
- Regulatory cost is a major part of a life insurer’s cost structure, totaling more than $11 billion over a ten-year horizon for the entire industry. Redundancies in state laws, lack of uniformity, slow product approvals and regulatory process complexities significantly contribute to these high costs.
- A life insurance carrier’s regulatory expenses typically cover far more than fees, with the greatest percentage of cost in the areas of information technology and product development.
- A single regulatory authority could reduce costs associated with complying with multiple regulatory jurisdictions.
- Industry-wide regulatory costs should not increase under an OFC.
- The area of OFC uniform product approval and producer licensing rules would realize the greatest reduction in costs.
- Under a streamlined regulatory system contained in the OFC proposal, the level of competition for the consumer’s insurance dollar should increase. Insurers will not have to postpone or shelve product rollouts as they do today because of state regulatory delays and differences in states laws.
“Life insurers need a modernized regulatory structure to better serve our customers and address competitive pressures from banks, securities firms and even overseas financial services firms. Our OFC proposal shows the way, and this report helps make the case for an optional federal regulator,” Keating said.
“We spent 18 months surveying the industry to gather and review quantitative data regarding regulatory costs,” said Michael W. Risley, president of the Life and Annuity division of CSC’s Financial Services Group. “This report reveals important new information and, like ACLI, we believe it will contribute significantly to the debate on modernizing insurance regulation.”
Download the full report.
About ACLI
The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 356 member companies account for 80 percent of the life insurance industry’s total assets in the United States. ACLI member companies offer life insurance, annuities, pensions, long-term care insurance, disability income insurance and other retirement and financial protection products. ACLI's public Web site can be accessed at www.acli.com.
About CSC
Founded in 1959, Computer Sciences Corporation is a leading global information technology (IT) services company. CSC’s mission is to provide customers in industry and government with solutions crafted to meet their specific challenges and enable them to profit from the advanced use of technology.
With approximately 79,000 employees, CSC provides innovative solutions for customers around the world by applying leading technologies and CSC’s own advanced capabilities. These include systems design and integration; IT and business process outsourcing; applications software development; Web and application hosting; and management consulting. Headquartered in El Segundo, Calif., CSC reported revenue of $14.1 billion from continuing operations for the 12 months ended April 1, 2005. For more information, visit the company’s Web site at www.csc.com.
