Redding: Federal Insurance Office survives U.S. Senate floor

Dodd-Frank reform path unclear

The U.S. Senate has passed its version of the Dodd-Frank Reform legislation, Senate Bill (SB) 2155, by a vote of 67-31. To move the bill, it required Democratic crossovers and 16 Democrats did just that on the Senate floor. Let’s step back and walk through how we got to this place and the issue’s importance to collision repairers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act established the U.S. Department of Treasury’s Federal Insurance Office (FIO) in 2010 and vested FIO with the authority to monitor all aspects of the insurance sector, monitor the extent to which traditionally underserved communities and consumers have access to affordable non-health insurance products and to represent the United States on prudential aspects of international insurance matters, including at the International Association of Insurance Supervisors.

In addition, FIO serves as an advisory member of the Financial Stability Oversight Council (FSOC), assists the Secretary with administration of the Terrorism Risk Insurance Program and advises the Secretary on important national and international insurance matters.

What began legislatively as an effort to introduce the federal regulation of insurance by former Congresswoman Melissa Bean, D-Ill., and Congressman Ed Royce, R-Calif., quickly became controversial as Dodd-Frank evolved. President Obama appointed the first head of the FIO, who had a state regulatory background. After missed report deadlines and a timid approach to even its most conservative role as a federal oversight agency, the FIO has settled in as part of the U.S. Department of Treasury.

Although the intent of its original mission, proposed in the legislative process, has not been achieved, clearly having the bones of FIO in place has much value to the collision repair industry. The state-based insurer regulatory structure has generally not been effective for repairers and consumers. Having an additional insurance regulatory agency for small businesses and consumers is an important goal. With limited resources, a federal regulatory structure works better for repairers than a 50-state model.
U.S. House Financial Services Committee Chairman Jeb Hensarling, R-Texas, put together partisan legislation that contained various repeal and reform provisions for Dodd-Frank. Hensarling’s Financial Choice Act, H.R. 10, eliminates FIO and establishes an insurance advocate in its place.

According to the Congressional Research Service, the House legislation includes the following:

“H.R. 10 would amend the Dodd-Frank provisions relating to FIO, FSOC and OLA; it would not amend the sections relating to Federal Reserve oversight of bank and thrift holding companies with insurance subsidiaries, nor the sections relating to surplus lines and reinsurance.

“Creation of the Office of Insurance Advocate (Title XI of H.R. 10) H.R. 10 would repeal the Dodd-Frank Title V provisions creating the Federal Insurance Office and replace it with a new Office of Independent Insurance Advocate. The new office would be similar to the FIO, but with [one] notable difference: independence.

“Both FIO and the new office are within the Treasury, but the Office of Independent Insurance Advocate would be established as an independent bureau with the authority to submit a separate budget request. The Advocate would be appointed by the President and confirmed by the Senate rather than being a civil service appointee. While being subject to general direction by the Treasury Secretary, the Secretary would not be able to delay or prevent the promulgation or rules by the Advocate, nor intervene in matters or proceedings before the Advocate.

“The head of FIO is currently an FSOC non-voting member, whereas the separate independent insurance expert is appointed by the President to serve as a voting member. H.R. 10 would essentially merge these roles, making the Advocate a voting member and removing the independent insurance expert position.

“To perform its function of monitoring the insurance industry, FIO is authorized to issue subpoenas requiring information from insurers. H.R. 10 tasks the Advocate with ‘observing’ the industry and the Advocate is to rely on publicly available information without subpoena authority.”

We now have a House-passed bill that is much more comprehensive than the Senate-passed bill and more aggressive relative to repealing or reforming the original Dodd-Frank provisions.

During the Senate Banking Committee consideration of Dodd-Frank reform, the ASA Collision leadership met with the Committee and various Senate offices to discuss concerns about repealing Dodd-Frank and specifically the House FIO language. In addition, collision repairers across the United States contacted their senators voicing opposition to repealing FIO or moving to an insurance advocate model as proposed in the House bill. Please note that several insurer and insurance agent associations opposed FIO even in 2010 when the original language was proposed. This is not a new conflict.

At the earliest point in the development of the Senate bill, Committee Chairman Michael Crapo, R-Idaho, and Ranking Member Sherrod Brown, D-Ohio, sought a compromise Dodd-Frank Reform package. This was not meant to be, and Crapo began working with conservative Democrats on the Committee to come up with the legislation that passed the Senate.

What happens now? House leaders have been busy moving individual reform bills targeting key pieces of the Dodd-Frank law. The Senate and House, from a process perspective, would get together in a House-Senate conference to address differences. In this politically charged environment, an election year and with the vast differences in the House and Senate bills, the more likely path is that the House will accept the Senate bill, or Dodd-Frank Reform legislation will die by the end of the year.

Although collision repairers have made much progress in protecting FIO since this reform effort started, this is no time to rest on our laurels. ASA is continuing to prioritize holding FIO’s structure in place with a goal of increasing FIO’s role as part of insurance regulation in the future.

The first step, once these reform efforts are put to bed, should be FIO including the collision industry on its federal advisory committee. As the insurer-repairer-consumer relationship continues to evolve, the regulation of these relationships will become increasingly important.

To learn more about ASA’s legislative representation, visit