By the time you read this, the Federal Insurance Office (FIO) will have released its much-anticipated report to Congress about modernizing and improving insurance regulation, as mandated by the Dodd-Frank Act.
It was due by the end of January, and, much to my chagrin, still had not been released as of Jan. 24. Without the actual report to analyze, I decided to take a look through dozens of the 147 letters from groups and individuals posted by the FIO after it solicited public input last fall in advance of drafting the report.
I wanted to get a sense of the type of feedback the fledgling agency received, which will be interesting to contrast with what recommendations are actually included in the report to Congress.
All the industry associations, consumer groups and many of the companies you might expect did indeed provide their two cents. The vast majority of the letters I reviewed seemed to agree on two primary issues: 1) The FIO needs to become the unified U.S. “voice” on international insurance matters; and 2) Don’t mess with the current state system of authority over insurance regulation.
There were letters urging the FIO to create an optional national insurance regulatory system, most notably in the comments from Agents for Change, a grassroots organization of 8,900 insurance agents and brokers who support insurance regulation reform. To quote their letter: “Today’s Byzantine state-based regulation hinders our business and does a disservice to our customers. The hoops we jump through to sell insurance products are costly, time-consuming, and make little sense in the 21st century marketplace.”
Other comments saying the state-based system is inadequate seemed to be centered on the belief that most states are simply ill-equipped to regulate insurers, with budget pressures preventing them from having the necessary resources to properly protect consumers.
But even Consumer Watchdog, which advocates for the rights of consumers, came down on the side of preserving state-based regulation: “A move toward federal oversight of insurance would inevitably be deregulatory. It would destabilize the industry and dismantle consumer protections, with the most severe impact on consumers in states like California that have built robust and effective regulatory regimes.”
AARP also supported the state system: “The state-based insurance regulatory system offers an effective model for protecting consumers and addressing issues unique to the insurance industry, especially in the property and casualty lines, where the perils against which insurance protects are regional in nature.”
Plenty of comment letters focused on issues specific to the P&C side of the business, but again, most endorsed state insurance regulation.
The work of the National Association of Insurance Commissioners (NAIC)to bring some uniformity to state laws was frequently mentioned. Most of them went on to say significant work remains toward increasing uniformity and that the FIO can work to promote further progress in this area without creating a system of federal regulation.
This is where the FIO can be effective, beyond the unified international presence. Identify areas for improving state regulation by increasing uniformity in areas such as licensing, product approval and compliance, and push the NAIC to make progress. When the threat of potential federal intervention exists, states get motivated to act real fast.
For our analysis of the (by now) released report, search using the term “FIO” at www.LifeHealthPro.com.
