House Preparing for Move on Insurance Reform
Administration Will Announce Plans for Insurance Industry Soon
The interest in insurance reform continues to grow in Washington, D.C. Hearing after hearing pushes Congress closer to making a decision as to whether to begin a dismantling of the current state insurance regulatory system, offer a federal regulatory option for insurers or leave the current state regulatory system in place.
The Obama administration is scheduled to announce its plans for an overhaul of the U.S. financial regulatory system very soon. There is much speculation about how far the administration will go with the insurance reform segment of the plan.
Just prior to the administration's scheduled announcement, Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Committee's subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, held a hearing on "Systemic Risk and Insurance." Similar to other committee hearings on the same issue, witnesses included insurance company representatives and state regulators.
Kanjorski has legislation that will create an Office of Insurance Information within the U.S. Department of the Treasury. This bill does not go as far as other initiatives that provide insurers with a federal or state regulatory option. In his opening statement at the hearing, Kanjorski said, "Moreover, I am confident that this administration will recognize the wisdom of creating a federal insurance office to advise a systemic risk overseer on the risks in the insurance sector, provide expertise to the administration and Congress on insurance policy matters, and communicate with foreign governments. I have long advocated for such an office by introducing and advancing the Insurance Information Act. As part of the congressional restructuring of financial services regulation, I ask my colleagues to join me in the effort to enact this legislation."
Rep. Melissa Bean, D-Ill., has introduced legislation that would offer an option of a federal charter for property and casualty insurance or life insurance.
Peter Skinner, a member of the European Parliament and chairman of the European Parliament Insurance Caucus, discussed Europe's progress with insurance reform. He said, "The United States' state-based regulatory system makes the dialogue between the European Union and the United States much more complicated. The significant divergence in regulatory systems also makes it more difficult to resolve problems such as the perennial issue of the discriminatory collateral requirements applied by U.S. regulators to non-U.S. reinsurers."
Skinner also emphasized the importance of more consumer protections by all countries.
Michael T. McRaith, director of insurance for Illinois, represented the National Association of Insurance Commissioners (NAIC) and continued its message that states should regulate insurance companies. McRaith in his testimony said, "A federal regulator would be unnecessary, duplicative and adverse to consumer interests, but as I have testified previously to this subcommittee, state insurance regulators endorse the goal of increasing knowledge of insurance at the federal level." McRaith concluded, "The state-based insurance regulatory system is one of the critical checks and balances, without the perils of a single point of failure and omnipotent decision making. States have a long history of consumer protection and market stability - the two pillars on which any system of financial stability regulation can, and must be built."
The insurance industry is divided as to whether federal regulation is necessary. For companies supporting a federal regulator model, there is division as to how far federal regulation should advance. In previous congresses, there was support for limiting any federal regulation to a life insurance option only. Bean's legislation, public statements by academia and grassroots interest have pushed the consideration of property and casualty insurance to the debate on federal insurance reform.
The Obama administration's anticipated white paper on financial services regulation will play a significant role in the insurance reform deliberations. Congress has much to consider this summer with supplemental appropriations for the war in Afghanistan and Iraq, health care reform and climate-energy legislation. It is unclear whether the financial services reform legislation will have time to mature prior to this fall.
The Automotive Service Association (ASA) will host a Capitol Hill Fly-in July 28-29 for ASA members. ASA members will meet with policymakers to discuss insurance reform. It is critically important that collision repairers don't miss this opportunity for input in the insurance reform discussions. It is unclear as to how far Congress will move in the reform effort, but interest in addressing this issue arguably has never been greater.
ASA members are encouraged to go to ASA's legislative Web site, www.TakingtheHill.com, and register for the Capitol Hill Fly-in by July 18. The Web site also includes information about related legislation.
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