The first panel of the hearing included John Huff, director of the Missouri Department of Insurance, Financial Institutions and Professional Registration; Susan Voss, commissioner of the Iowa Insurance Division and president of the National Association of Insurance Commissioners (NAIC); and Greg Wren, a Republican member of the Alabama House of Representatives and treasurer of the National Conference of Insurance Legislators. Other witnesses included Birny Birnbaum, executive director of the Center for Economic Justice; and Andrew Furgatch, chairman, chief executive officer and president of Magna Carta Companies Inc.
All of the witnesses touched on the new Federal Insurance Office (FIO) created under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Voss made the following remarks regarding the FIO: “The Dodd-Frank Act requires FIO to issue a report on insurance regulation … The report will include legislative recommendations and look at the potential for federal regulation of insurance. We hope the report will be honest and factual, but we continue to believe there is an inherent conflict in an office of the Treasury Department studying ways to further empower itself. While the national state-based system of insurance regulation has successfully protected the interest of consumers for decades, state regulators recognize that, like any regulatory system, it is not perfect and we are open to hearing any suggestions FIO may have for improvements.
To date, the NAIC has had a good relationship with FIO, and we look forward to continuing that relationship going forward and working with our friend and former colleague, Mike McRaith.” (McRaith is director of the FIO.)
Birnbaum spoke on behalf of consumers, stating that consumers weren’t receiving enough protection and consideration:
“In the vast majority of states, there are no consumer organizations focusing on insurance issues other than health insurance. So, for the vast majority of regulatory issues, there are no consumer perspectives to balance out the many industry voices pushing for the industry policies. Even when there is a consumer voice, it is typically outnumbered and outspent by massive amounts.”
Birnbaum also went on to list auto insurance redlining as a market problem not identified by state insurance regulators. To improve market regulation, Birnbaum suggested state insurance regulators “collect and publish detailed market performance data about individual insurers in the same way that Home Mortgage Disclosure Act data are collected and published for lenders’ market performance.”
Furgatch, on behalf of Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies, made comments regarding the McCarran-Ferguson Act:
“Since the mid-1800s, U.S. property casualty insurers have been regulated by each of the states in which they conduct business. By adopting the McCarran-Ferguson Actin 1945, Congress endorsed state oversight of insurance. State regulation seeks to ensure that insurers will be solvent to pay their policyholders’ claims and protects consumer rights with respect to privacy and insurance coverage. During the recent financial crisis involving troubled banks and securities firms, fiscally prudent regulatory oversight by states was found to be effective in safeguarding insurance purchasers and ensuring the financial strength of U.S. insurance markets and businesses.”
Furgatch also made comments regarding the FIO: “The creation of the new Federal Insurance Office marks the first time that the federal government has had any general oversight authority over the insurance industry. While Congress was careful to state that the FIO will have no regulatory authority, it does have substantial powers to study, collect information and issue reports on various aspects of the insurance industry as well as to pre-empt state laws in limited circumstances where they conflict with Treasury-negotiated international agreements. One of the most significant potential areas for abuse is FIO’s authority to collect information on the insurance industry.”
To see full testimony from the hearing, visit ASA’s legislative website at www.TakingTheHill.com.
