Congress should refuse to fund a study of insurance regulation that the new Federal Insurance Office is supposed to conduct, an insurance agents’ trade group said.
The National Association of Professional Insurance Agents (PIA) also wants Congress to repeal the mandate granted to the FIO to make recommendations to Congress regarding insurance regulation based upon that study.
But some others in the insurance industry contend the study is important and should be allowed to go forward.
PIA argues that federal employees should not be asked to decide whether they should be given more authority.
“Federal bureaucrats should not be conducting a study on whether or not their own powers should be expanded, and then making recommendations to Congress based on a study that they alone conducted,” said PIA National Executive Vice President and CEO Leonard C. Brevik.
The PIA executive said that if the study is to be done at all, it should be done by the Government Accountability Office (GAO), an arm of Congress.
The Dodd-Frank law establishing the FIO calls for it to report on “the costs and benefits of potential federal regulation of insurance across various lines” of insurance.
According to Brevik, this creates an “inherent “conflict of interest.
“It assures a biased result because it asks federal regulators if they believe in federal regulation. Of course their answer will be ‘yes.’ Congress needs to defund this Trojan horse for federal expansion and encroachment,” Brevik said.
Mutual insurers appear to share PIA’s concern about FIO being expanded, although they have not joined the call for defunding of the study.
“We’ve been concerned about the study from the moment it was introduced. In Washington, it seems any office asked to study itself will unfailingly determine that it needs more authority, a bigger staff and, certainly, a bigger budget,” Matt Brady, media relations director, National Association of Mutual Insurers (NAMIC), told Insurance Journal
Brady said NAMIC has been “very vocal about the need to ensure the FIO stays true to that intent and prevented from expanding beyond it.”
Others in the insurance industry are not buying PIA’s warning or the call for defunding.
“Any suggestion to defund this essential study is out of touch with the challenges facing the industry,” said Blain Rethmeier, senior vice president of Public Affairs for the insurer-backed American Insurance Association. “We must increase the federal government’s capacity to address insurance related issues and this study will make a substantial contribution toward broadening and deepening our nation’s understanding of the critical role insurance plays in our financial system.”
Agent groups, including PIA and the Independent Insurance Agents and Brokers of America (Big “I”), have strongly opposed federal regulation of insurance, while insurer ranks have been split on the issue. AIA has supported giving insurers the option of being regulated at the federal or state level. NAMIC and the Property Casualty Insurers Association of America (PCI) have opposed federal regulation and warned about potential duplication of state regulatory efforts by any federal office.
The law currently restricts the authority of FIO and prohibits the new federal agency from exercising general supervisory or regulatory authority over the business of insurance, authority that now rests with states.
But Brevik has accused the Obama Administration of trying to “expand the FIO into an insurance policy-setting body, which exceeds its mandate.”
Brevik said Treasury Deputy Secretary Neal Wolin (a former executive at The Hartford) has supported “an interpretation that would vastly expand” the FIO’s activities. He quotes Wolin as having said that “the federal government will work toward modernizing and improving our system of insurance regulation.”
Thus, according to PIA, it is “critical” that the FIO not be permitted to conduct studies and make policy recommendations to Congress.
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