ShareThisFederal Insurance Regulation
For the Wrong Answer, There is No Right Time
By Roger Schmelzer
NAMIC Vice President - Regulatory Affairs
While insurance regulation reforms are needed, federal regulation of insurance is the wrong approach. NAMIC conveyed that sentiment in a statement to Chairman John McCain, R-Ariz., who presided over the Senate Commerce, Science & Transportation Committee hearing on “Federal Involvement in Regulation of the Insurance Industry.”
The key to insurance regulation reform is elimination of unnecessary regulatory barriers that impede competition while respecting those regulatory and legal differences that reflect a state’s unique underwriting and risk assessment environment. As an example, prior approval of rates is a discredited and outdated method of regulation that needlessly impairs the ability of regional and national insurers to bring new products to market quickly. Achieving balance between market conduct and competition is best left to states.
A federal regulator, or even a dual charter, is not in the best interest of the industry or consumers for several reasons:
- Social regulation would, in all probability, be employed, harming the industry’s ability to accurately and fairly price risk;
- There is no guarantee that proven free market reforms would be incorporated;
- A system of dual regulation would add a layer of bureaucracy and cost that would ultimately be paid by policyholders; and
- Any regulatory mistakes will not be contained within a single state, but rather will have an immediate national impact.
These concerns are not theoretical. Senate Bill 1373, the Insurance Consumer Protection Act of 2003, would ensure that NAMIC member companies’ greatest concerns regarding federal regulation of insurance will become reality. In the final analysis, before Congress intercedes, state legislative action must be the focus of modernization initiatives.
Important and effective national organizations such as the National Conference of State Legislatures (NCSL), The National Conference of Insurance Legislators (NCOIL), and the American Legislative Exchange Council (ALEC) are prepared to lead reform efforts in the states. Additionally, the National Association of Insurance Commissioners (NAIC) is charged with the task of leading implementation of insurance policy decisions made by the legislatures in their respective states.
The complete NAMIC policy discussion on the benefits of reformed state insurance regulation versus federal oversight regulation of insurance is articulated in NAMIC’s Policy Paper, Regulation of Property/Casualty Insurance: The Road to Reform.
Posted: Wednesday, December 10, 2003 12:00:00 AM. Modified: Thursday, June 17, 2004 2:26:49 PM.
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