BY JIM CONNOLLY
NU Online News Service
Reacting to the U.S. Treasury Department financial reform blueprint calling for an optional federal charter for insurers, one state insurance commissioner said she would be contacting every member of her legislature for feedback.
Iowa Insurance Commissioner Susan Voss, who was critical of the Treasury plan which also envisions a national insurance office, made her comments as members of the National Association of Insurance Commissioners criticized the Treasury report during the last day of their meeting here.
NAIC members were furnished with an advance draft of the Treasury proposal which they discussed after its official unveiling Monday.
Before reacting during their plenary session, commissioners and attendees watched a televised debate over the Treasury blueprint that included NAIC President Sandy Praeger, who is Kansas insurance commissioner, as well as Marc Racicot, president of the American Insurance Association, Washington, and former Montana governor.
Commissioner Voss said she has sent a letter to all 150 Iowa state legislators about the report and the issue. The report is a “stepping stone” to discuss the issue of state insurance regulation, she said.
Ms. Voss remarked that in the report, “nobody is talking about the consumer,” and she wondered whether members of the public who had an insurance problem in their state would want to call a toll-free number located in Washington, D.C.
She said state legislators should know that if the Treasury plan went into effect, in many cases, when a consumer calls their office seeking assistance on an insurance matter, they will have to respond, “Talk to your congressman.”
Commissioner Voss said that while there are certainly improvements that can be made to a state insurance regulatory system, “there is no need to implode a system to make sure there are improvements.”
Joel Ario, Pennsylvania insurance commissioner, said problems that have arisen in regulating financial services have “originated from federal regulatory issues and not state issues. To drag the state system into the federal system makes no sense.” The strength of the state system is that it is accessible to the consumer, he said.
When problems surfaced with subprime mortgage market defaults, it was with the banks, said Wisconsin Insurance Commissioner Sean Dilweg. “I don’t see where the federal government stepped in to deal with the problem,” he added.
Mr. Dilweg said federal regulation of Medicare Advantage programs by the Center for Medicare and Medicaid Services, Washington, is just one example of how state regulation could be more effective than federal regulation.
Ohio Insurance Department Director Mary Jo Hudson called the Treasury report “a red herring to hide the failings of the federal system.”
She said that “having two systems will result in a race to the bottom.” Ms. Hudson pointed to state initiatives such as speed-to-market reform, insurance solvency issues and the Interstate Insurance Product Regulation Commission as evidence that state regulation is working.
Mila Kofman, the new Maine superintendent, said that “any effort to federalize the regulation of insurance at the expense of existing state-based oversight and consumer protections is bad public policy.” She said she still needed to review the specifics of the proposal and its impact on specific business lines.
NAIC-funded consumer advocate Kevin Lembo said: “There are many very positive aspects of the Bush administration’s plan for greater oversight and intervention in the financial regulatory system. One element of the report that makes no sense at all, however, is the creation of an optional federal regulator for insurance companies.
“This industry-driven call for an optional federal charter moves regulation and intervention further away from consumers, leaving them with only an ‘800 number’ to protect them from abuses in the insurance market. The only one to benefit from such a move is the insurance industry. The big losers? Consumers.
“Right now, consumers can hold their government accountable because our insurance commissioners are appointed by governors directly elected by the people. Once insurance in lost in the Washington abyss, who will we hold accountable?”