Consumer representatives to the NAIC say in a letter to the Federal Insurance Office (FIO) that effective insurance regulation requires greater transparency and substantive regulation.
The letter also said that insurance regulation through market competition “would be inadequate,” and said regulatory modernization “should not become deregulation by another name.”
The letter stated that neither state nor federal regulation is inherently superior. The issue “is what works best.”
The letter voiced concern that a dual or “optional” [federal] charter would likely repeat the failure of our dual banking system, “where regulators competed through deregulation.”
The consumer reps also acknowledged that international regulatory cooperation is increasingly important.
But, the letter said, “it cannot be used as an excuse to dilute state and federal consumer protection standards.”
The letter was written in response to requests for comment from the Treasury Department and FIO on how the industry should be modernized and regulated going forward.
The comments were requested as the Treasury and FIO work to complete a report on those issues mandated by the Dodd-Frank financial services reform law.
Michael McRaith, FIO director, is indicating to industry officials and the media that the report should be out before the end of January, as mandated by the Dodd-Frank Act.
The consumer representatives said they wrote the letter “to help bring consumer concerns to the forefront of the debate on insurance modernization and as a neutral voice in the continuing battle between advocates for state or federal regulation of insurance.”
In their letter, the consumer representatives stressed the importance of greater transparency in insurance regulation.
“Consumers need access to policy forms and other information including producer compensation and market conduct data that is routinely available in other financial sectors,” the letter said.
The letter said that the FIO should require insurers to affirmatively address climate change issues, and that regulators need to be more proactive in investigating insurer handling of claims, enforcing claim handling laws and empowering consumers to better protect themselves.
Moreover, the letter said, the FIO should increase the amount of insurance company data and statistics that are publicly available, “as it is in other financial sectors.”
The letter also voiced concern that, “after a short period of abashed docility – and successful requests for a government bailout exceeding many hundreds of billions of dollars – the financial services industry has returned to its mantra that the best regulation is usually the least regulation.”