Last month, a coalition of seven top insurers made their way to Washington, D.C. in order to speak out against the use of bank-centric metrics in the industry's regulator oversight. Last Monday, some help for the group came in the form of a new amendment to the Dodd-Frank law. Here's what investors need to know.

The Dodd-Frank law calls for added oversight on behalf of financial institutions that are deemed systemically important. The Federal Reserve is responsible for the added scrutiny of those financial firms with the SIFI designation.

Among the seven to march on Washington -- Prudential Financial (NYSE:PRU), MetLife (NYSE:MET), Nationwide, State Farm, Mutual of Omaha, New York Life, and TIAA-CREF -- only Prudential has been formally designated as systemically important. MetLife remains in the final stages of the SIFI review, while the other members of the coalition either operate as savings and loan holding companies and are therefore subject to Fed oversight, or are simply interested parties.

In addition to Prudential Financial, American International Group (NYSE:AIG) was deemed SIFI, and Berkshire Hathaway (NYSE:BRK.B) is being considered for the designation as well.

Since it was passed, the Dodd-Frank law has allowed increased oversight by regulators into the operations of businesses across the financial spectrum. But law did not account for the differences in business practices that would skew the results of that oversight. That's exactly what's at issue for the insurers.

Insurers versus banks
Though the Dodd-Frank stress tests have been a successful measure of the nation's banks and their ability to withstand stress scenarios, the insurers feel that the same metrics and requirements don't fit with their operations.

Though insurers are required to hold capital reserves, the operations that would deem a bank risky (and thereby needing increased reserves) falls within the operational norm for insurers.

The law delineating the requirements and oversight function did not specify the ability for the Fed to change the requirements based on the business it is reviewing. But that may be about to change.

Making amends
Monday, Senator Susan Collins from Maine introduced an amendment to the Dodd-Frank law that would give the Fed the flexibility to tailor its requirements for the businesses it oversees. Senator Collins stated that the amendment would mean that while the Fed can establish minimum capital requirements for holding companies on a consolidated basis, that it would be able to exclude insurers that are participating in business activities that are considered insurance under state regulations.

This is a huge step for the insurers that may find themselves facing the Fed's oversight staff in the coming years.

"We view this as a significant, positive step forward in addressing this important issue and are very appreciative of Senator Collins' leadership on this, in addition to the leadership of Sens. Brown and Johanns. We feel we are very close to bipartisan consensus legislation that we are hopeful will be signed into law this year," according to the coalition's representative and former Nationwide lobbyist, Bridget Hagan.

While further alterations to the Dodd-Frank law may be required, including the specifics needed to address the differences in accounting between a bank and an insurer, insurers and their investors should be satisfied that Washington heard the call that changes were needed.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.