On Feb. 11, Reps. Melissa Bean (D-Ill.) and Ed Royce, (R-Calif.) announced that they plan to introduce the National Insurance Consumer Protection and Regulatory Modernization Act. The Act would create a federal charter for insurance regulation and would create, according to Bean, a “streamlined and uniform regulatory process that enhances competition and reduces the multi-state regulation barriers.”
Under the Act, the National Association of Insurance Commissioners’ model laws on consumer protection would be incorporated into a newly created Office of National Insurance (ONI) to provide more uniform regulation across the country. Specifically, the Act would create a new position for a “systemic risk” regulator to monitor and gather financial data from insurers and other affiliates in a holding company structure. In addition, it would allow the ONI access to financial records of all affiliates within a holding company structure. The Act would require consultation of the ONI to find the most effective form of regulation for systematically important issues and regulate federally registered insurance holding companies that have a predominant share of insurance businesses at the holding company level.
What does the proposed regulatory system mean to Mississippians? Some folks say that it is simply another cost of government. The proposed Act would place a federal regulatory office in each state. Michelle Minton, a policy analyst with the Competitive Enterprise Institute, a free-market think tank, believes by doing that, it would eliminate some of the greatest benefits that the optional federal charter theoretically would have provided, mainly regulatory efficiency and cost savings.
In the State of Mississippi, insurers are regulated by the Mississippi Insurance Department, a state agency run by Insurance Commissioner Mike Chaney. The commissioner is charged with execution of all laws relative to insurance companies, corporations, associations and fraternal orders, their agents and adjusters.
“What they’re proposing in this bill is a general concept of federal regulation as opposed to state regulation,” Chaney said. “A federal insurance czar would effectively remove local input into insurance regulation. Federal control would create yet another layer of government bureaucracy with the feds setting the insurance rates for everyone. That would likely add to more tax burden and reduce states from being policy implementors to simply being policy enforcers. I am also concerned that it would have an adverse impact on competition in the insurance marketplace.”
Mark Hair, who serves as the deputy insurance commissioner, added that Mississippi already has an insurance guarantee association which protects consumers against insurance insolvencies, as well as risk pools and a system for sanctioning inappropriate insurance activity.
Hair said, “The Federal government would have to duplicate those services. The state system isn’t perfect, but it’s preferable to the federal government stepping in. We can best respond to local issues. Besides, the proposed Act would be a huge tax burden to consumers.”
Hair said that the Federal government always seems to cite the need for uniform control among the states, yet state regulators have worked together for years through the National Association of Insurance Commissioners.
“The states have had a long history and experience in regulatory insurance matters. To open a new Federal regulatory office in each state will only cost the tax payers more money,” he said.
Not everyone is opposed to the proposed legislation. The Allstate Corporation is the nation’s largest publicly held personal lines insurer, offering products and services including auto and homeowners insurance, as well as life insurance, supplemental accidental and health insurance, annuity, banking and retirement products. The company was founded in 1931.
April Eaton serves as the company’s senior corporate relations manager. According to Eaton, Allstate supports the federal charter legislation in its current form.
She said, “A federal insurance charter will streamline costs and bring about greater efficiency in helping Mississippi consumers meet their insurance needs. We believe Mississippians deserve a better system to offer stability and protection when it comes to their insurance.”
Contact MBJ contributing writer Susan Marquez at email@example.com .