The National Association of Professional Insurance Agents (PIA) applauded three groups for their renewed commitment to oppose federal regulation of insurance and cited the meltdown of the U.S. financial sector as a reason to leave insurers under state regulation.
The National Conference of Insurance Legislators (NCOIL) has announced plans to hold a summit of state officials opposed to federal regulation of the insurance industry. The National Association of Mutual Insurance Companies (NAMIC) has launched a nationwide grassroots action campaign to protect the interests of insurance companies in the upcoming overhaul of financial services regulation. And the Council of State Governments (CSG) reiterated its opposition to federal insurance chartering by adopting a resolution during its recent meeting in Omaha, Neb. The PIA believes each of these actions is important to its fight against possible action by Congress that would place the authority to regulate insurance companies in the hands of the federal government.
HR 5840, which would establish a federal Office of Insurance Information (OII) within the Department of the Treasury, was introduced in the House of Representatives in April 2008. The OII would provide legislators with expertise and guidance on insurance issues and recommend how the government should respond to insurance issues. A subcommittee recommended passage of the bill in July, but it has yet to pass through the House.
At a hearing related to the bill in June, Jeremiah O. Norton, deputy assistant secretary of the U.S. Department of Treasury, outlined the need for insurance regulatory modernization and discussed the U.S. Treasury Department’s Blueprint for a Modernized Financial Regulatory Structure. In the Blueprint, the Treasury calls for the establishment of an optional federal charter (OFC) for insurance and the establishment of an Office of Insurance Oversight within the U.S. Department of Treasury.
The Automotive Service Association (ASA) has said it supports federal regulation of the insurance industry, but not an OFC. The Consumer Federation of America (CFA) is also leery of the OFC.
PIA National Executive Vice President & CEO Leonard C. Brevik said that the summit of state officials being convened by NCOIL and the nationwide grassroots action by NAMIC are well-timed.
“The supporters of an Optional Federal Charter (OFC) and the Office of Insurance Information have already made it clear that they will attempt to exploit the financial downturn to try to convince Congress to absorb insurance into the failed federal regulatory structure that led to the meltdown in banking and securities,” Brevik said. “The sectors of our economy which were imprudent will now attempt to shift the responsibility for their irresponsible behavior to the one sector of our economy that behaved responsibly, the insurance sector, which was prudently regulated by the states.”
At least one group of insurers, the American Insurance Association (AIA), supports federal regulation.
“The Office of Insurance Information could be a tremendously valuable tool for enabling the U.S. to speak with one voice on important insurance matters and for establishing U.S. leadership globally on developing international standards for insurance regulation," Marc Racicot, AIA president, said in July.
Brevik said the PIA believes Congress should simply leave well enough alone.
“Lawmakers need to realize that state insurance regulation has proven to be a resounding success, while federal regulation in the banking and securities sectors was an abysmal failure that precipitated the financial crisis,” Brevik said. “Congress needs to preserve what worked as it fixes what failed.”
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