Meanwhile back at the Ranch ....

Now that Mr. Spitzer is no longer distracting the insurance industry (as he is distracted by his own problems  — like running for governor and not losing any more cases), we are seeing attention returning to the problem of insurance regulation. 

The National Association of Insurance Commissioners (NAIC) is saying we need state regulation and the states are, in fact, doing a pretty good job.  Insurance Agents and others want the SMART Act  passed (which would essentially take away most state powers to regulate prices and market conduct) while life insurers would like to have a dual charter system like the banking system.  According to the NY Times, this Optional Federal Charter has been pushed most recently by a large group of insurers (including AIG) and would allow insurers to choose whether they wanted to be regulated by the states or by a federal regulator.* 

Evidently consumer groups also oppose federal regulation (see above linked NY Times article).  Having a dual regulatory structure reduces the influence consumer advocates can have as long there is a Republican controlled Congress.  Presumably, Congress will look at the SMART Act this summer and that a Optional Federal Charter bill will be introduced soon too.  (I recall seeing an American Bankers Association draft of one some time ago.)

I don’t think the consumer advocate bandwagon has been able to get its steam up yet, but it will be interesting to see the comments and themes develop about how bad federal regulation will be.

*Just a snarky note, the NY Times article linked here refers to the NAIC as the National Association of Insurance Regulators.

Comments

[R.J. Lehmann]

I was actually at the House Subcommittee hearings on the SMART Act earlier today. Some notes I found interesting:

1. The Congressman to most clearly voice his support for an Optional Federal Charter was a Democrat -- Paul Kanjorski of Pennsylvania. He's also the sponsor of the House version of the TRIA extension bill.

2. They put togethether a panel of five former insurance commissioners (including some VERY recent ones, like Greg Serio) together with Diane Koken, the current NAIC prez. It's amazing how stepping OUT of the role of state regulator seems to turn one's whole perspective around.

3. The "consumer groups" (which, for all intents and purposes really means Bob Hunter at the Consumer Federation, as the other major groups like Public Citizen and Consumers Union haven't been weighing in on this) FAVOR federal regulation. What they oppose is the SMART Act. Unlike the OFC, the SMART Act doesn't actually create a federal regulator. What it does, primarily, is create some binding mechanisms so that when NCOIL or the NAIC adopt a model law, once a certain tipping point of states pass it, it becomes the law of the land everywhere. The SMART Act also basically phases out rate regulation P/C business altogether -- hence Hunter's opposition. But it is certainly not from the standpoint of federalism that CFA opposes these measures -- what they want is an activist federal regulator AND activist state regulators, where the only pre-emptions would be for more stringent national regulations, not less stringent ones.