In seeking comments from the property- casualty industry on what insurance regulation should look like in the United States, the Treasury Department laid bare a rift between those seeking to maintain the current state-based system and proponents of a federal oversight option.
The Treasury asked the industry to provide its views in connection with a review of the regulatory structure for insurers—part of a broader initiative to prepare a blueprint for an improved U.S. financial regulatory structure.
In comment letters submitted on the issue, some insurance trade groups voiced support for an optional federal charter approach, while others such as the Independent Insurance Agents and Brokers of America, endorsed a “vital but limited federal legislative role to modernize the state regulatory system to overcome obstacles that currently exist.”
At the same time, the National Association of Professional Insurance Agents was critical of the whole process, saying the Treasury Department’s broad review of financial regulation “is biased in favor of federal regulation of insurance and foreign business entities.”
Specifically, PIA said in its comment letter that it “supports continued state regulation and oversight of insurance, not industry-managed self-regulation under the guise of global competitiveness.”
PIA added that “rather than soliciting comment from interested parties in an objective manner,” the notice in the Federal Register poses a series of “loaded questions” designed to encourage predetermined responses.
“No attempt is made to disguise the clear bias of these questions,” according to Leonard Brevik, executive vice president and CEO of PIA. “For example, three questions that specifically relate to insurance all attempt to elicit comments supportive of federal regulation of insurance. This survey clearly lacks objectivity and is slanted toward expanding federal regulation of insurance.”
Other producers would not mind giving Washington a shot at the regulatory job, in the form of an optional federal charter.
In its comments, the Council of Insurance Agents and Brokers said that “creation of an OFC regime” is the group’s “preferred method of reform, because such a system would give insurers and producers the choice between a single federal regulator and multiple state regulators.
The CIAB comments—by Scott Sinder, outside regulatory counsel—explained that such an approach “would not dismantle the state system; rather it would complement the state system with the addition of a federal partner.”
The result, Mr. Sinder said, is that “it is likely that many insurers and producers—particularly those who operate in a single state or perhaps a small number of states—would choose to remain state-licensed.”