In the face of growing economic turmoil, the Bush administration is calling for an overhaul of the system regulating the nation’s financial services industries — including insurance. The reform proposal announced by Treasury Secretary Henry M. Paulson calls for insurance companies to be given the option of federal instead of state regulation, along with the creation of a national insurance regulator and a national system licensing of producers.
The fight is definitely on, as national insurance agents’ group and insurance trade organizations line up for or against the federal government playing a bigger role in the oversight of insurance regulatory matters.
A Divisive Issue
It’s no surprise that the National Association of Insurance Regulators (NAIC) thinks this is a bad idea.
“While we certainly support better coordinating and modernizing of their oversight efforts, modern does not mean ‘federal.’ State insurance regulators are marginalized in this report and, frankly, for our sector it looks more like a solution in search of a problem,” said NAIC President Sandy Praeger.
But, agents’ groups were on both sides of the issue.
The Council of Insurance Agents & Brokers called the blueprint “a turning point in the decades of efforts to modernize insurance regulation.”
“Insurance is an increasingly global business, and inherently interstate, but state-by-state insurance regulation has failed to keep pace with convergence and consolidation,” said Ken Crerar, president of The Council, which represents domestic and international commercial insurance agents and brokers.
The “Big I” disagreed. Robert Rusbuldt, president and CEO of the Independent Insurance Agents & Brokers of America, said there are better ways to improve insurance regulation than moving toward a national system.
“While the Treasury’s recommendation does not come as a surprise since they would become the new federal insurance regulator, proposing a massive overhaul of insurance regulation when the insurance market is one of the few stable sectors in the financial services industry seems odd to many. Clearly, we need more uniformity and efficiency in our regulatory system, but there are better ways to achieve this reform with less risk for the market,” he said.
Washington, D.C.-based American Insurance Association, an avid and a long-time supporter of the optional federal charter, applauds the move by the feds, while the National Association of Mutual Insurance Companies based in Indianapolis does not. Suburban Chicago-based Property Casualty Insurers Association of America is less supportive, but walking a fine line in its position.
It is not unusual that the industry is so divided on this important issue. What will be telling is how that division will impact the outcome of this proposal — being made by a lame duck administration in a recessionary economy, where insurers are battling competitively in a soft market.
The fight is on.
Was this article valuable?
Here are more articles you may enjoy.