The current regulatory system in place within the United States for the insurance industry is fragmented and managed separately by each state. Many individuals from the industry and the regulatory agencies have the belief that the state governed system is overly complicated and plagued by bureaucracy.

Within the federal legislature there have been two separate ideas presented to improve regulation. The first proposal is a chartering system that will mimic some aspects of the national banking regulatory system. The second proposal is a complete overhaul and update to the state based system.

Regulation over most insurance business is handled by individual states outlined within the 1999 Gramm-Leach-Bliley Financial Services Modernization Act. One of the purposes of this act was to consolidate licensing and reciprocity for insurance marketers and the results being the protection of at least 12 statutes within the state based system.

A current piece of legislation that was recently released by congressional representatives Mike Oxley, with the House Financial Services Committee, and Richard Baker, with the Subcommittee on Capital Markets, Insurance and Government sponsored Enterprises, is named the SMART Act. The SMART Act a/k/a the State Modernization and Regulatory Transparency was written with the intent of improving regulation for insurance industry issues such as property insurance, life and health insurance, reinsurance, and broker credentials among other items.

This Act would also allow greater efficiency in the development of new insurance products and provide additional opportunities for states to mediate disputes and conform to a specific set of universal standards all by using currently established government agencies. The life insurance industry is believed to be the most affected segment of the Act.

Overall the insurance industry seems to have embraced most items in the SMART Act and feel it could be a starting point toward improved regulation. This piece of legislation has also enjoyed support by independent insurance agency groups such as the American Insurance Association and the Property and Casualty Insurers Association of America.

The purpose and hopefully also the end result of modern insurance regulation is to have consumers realize specific benefits from the changes, such as more accessible life, health, and property insurance products, greater transparency, and lower insurance premiums.