Bill Would Limit Authority of FIO
The U.S. House of Representatives Financial Services Committee’s Subcommittee on Housing and Insurance held a hearing titled “Legislative Proposals to Reform Domestic Insurance Policy.” The hearing focused on several important pieces of legislation, but one of particular interest to collision repairers. This is a bill drafted by U.S. Rep. Steve Stivers (R-Ohio).
Stivers’ bill, the Insurance Data Protection Act of 2014, seeks to limit the authority of the Federal Insurance Office (FIO) and the Office of Financial Research (OFR). ASA was an original supporter of the creation of the FIO. ASA believes the scope of authority for the FIO is already too limited and was restricted during the legislative process that created the FIO in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010.
Some insurers sought to weaken the FIO during the Dodd-Frank Act debate. The current authority for the FIO is very limited and should be expanded as far as insurance regulation, not diminished.
The Insurance Subcommittee hearing covered several pieces of legislation but testimony surrounding the Insurance Data bill was the most important for collision repairers. Joseph Kohmann testified for the Property Casualty Insurers Association of America (PCI) stating: “PCI strongly supports the proposed Insurance Data Protection Act, sponsored by Rep. Steve Stivers. The bill makes some important clarifications regarding the appropriate protection on confidential data submitted by insurers to the Federal Insurance Office and Office of Financial Research.
“The bill will ensure that confidentiality applicable to information relating to insurance companies is not lost when that information is shared among various federal and state regulators. The Dodd-Frank Act now provides that privileged information retains its privilege when it is submitted to FIO, but it is less clear whether that privilege might be lost if FIO shares it with other federal or state agencies. For example, Dodd-Frank authorizes FIO to disclose information to state regulators. The regulators would be bound by an information sharing agreement with the government, but a judge might later subject the information from the state regulators to a subpoena, taking the position that the information-sharing agreement applies only to the state regulator or the National Association of Insurance Commissioners and not to the courts. There is no evidence that Congress intended that privileged information should lose its privilege when it is shared with other state or federal regulators.”
Daniel Schwarcz, University of Minnesota Law School professor, was also a witness at the hearing and emphasized several times the importance of the federal government maintaining a “robust presence in regulating potentially systemically risky insurance entities and activities, and in monitoring the insurance market for potential new sources of systemic risk.”
Other risk management academics have emphasized the importance of shifting to a federal regulatory insurance structure versus the 50-state regulatory system now in place.
Schwarcz commented: “… I believe that the proposed Data Protection Act is unwise public policy because it could unduly inhibit the ability of FIO and OFR to identify potential or emerging sources of systemic risk in insurance. This is a crucial supplement to the Fed’s insurance-regulatory role: the Fed’s authority extends only to a small subset of insurers and insurance-focused companies, but systemic risk in insurance can arise outside of individual large insurance companies due to correlations among insurance carriers’ practices or risk exposures.
“In order to appropriately monitor the insurance industry for new or emerging sources of systemic risk, both FIO and OFR may well need information that
is neither publicly available nor currently accessible from other agencies. The reason is simple: by their very nature, new or emerging sources of systemic risk may not be fully reflected in preexisting documentation or data. To be sure, this is likely to be rare, especially given the extensive nature of the financial data that state regulators currently collect. Indeed, FIO has not actually used its subpoena power to date.”
There is no indication that the House Financial Services Committee will move on this bill in the near future. With this being an election year, there is a narrow window for legislation to pass the House and Senate. Without a major financial services bill moving, legislation like the Data Protection bill is unlikely to pass both the House and Senate this year.
ASA met with key members of the House Financial Services Committee, and they emphasized that this legislation was unlikely to move in this session of the Congress.
To view a copy of the Insurance Data Protection Act of 2014 and related material, please
go to ASA’s legislative website, www.TakingTheHill.com.