The Financial Services Company is a large life insurer that sells annuity products to retired people. Company actuaries have designed a new annuity contract that combines lifetime annuity benefits with long-term care in a skilled nursing home. Financial Services wants to market the new annuity nationally in all 50 states. The company faces competition from a national commercial bank that is trying to sell a similar product to Social Security beneficiaries. The CEO of Financial Services believes that the new annuity product could be marketed more efficiently if the company had a federal charter. Several members of the board of directors, however, believe that a federal charter would be undesirable.
a. What major regulatory obstacle does Financial Services face in trying to market the new annuity product in each state under the present system of state regulation?
b. Assume that Financial Services has the option of obtaining a federal charter. Explain the advantages, if any, of a federal charter to Financial Services in their efforts to market the new annuity product.
c. Explain the major arguments against federal charters.