Proposed Federal Insurance Regulation

Unlike banking and securities products, which are about access to credit and risk taking, insurance is a legal promise—a guarantee—to pay benefits if and when a certain event occurs. Insurance products are rooted in the separate contract, tort, and social policy laws of each state where they are sold and require a more accountable, accessible type of protection that states can best provide. Congress endorsed state oversight of insurance in 1945 with the McCarran-Ferguson Act and specifically recognized and reaffirmed the benefits of the state system in 1999 when it modernized federal financial supervision laws in the Gramm-Leach-Bliley Act (GLBA). Since then, however, insurance industry Washington lobbyists have pushed for a federal insurance charter and a new regulatory regime in Washington that would diminish or supplant successful and effective state-based consumer protections.

Key Points

  • Effective consumer protection is the hallmark of state regulation. State insurance protections successfully and effectively safeguard individual and commercial policyholders and ensure the financial strength of U.S. insurance markets.
  • The NAIC is modernizing insurance supervision across the regulatory spectrum to establish national platforms to provide operational efficiencies while enhancing the ability of local officials to protect consumer in the communities where they live.
  • Federal chartering would create a new federal bureaucracy from scratch and allow insurance companies to “opt out” of comprehensive consumer protections and state oversight. Current proposals would gut consumer protection while outsourcing most critical regulatory functions to industry-run self-regulatory organizations.
  • A bifurcated regulatory regime where insurers pick their regulator threatens regulatory arbitrage. This sort of race-to-the-bottom oversight is especially dangerous in insurance, where families and businesses faced with a storm, fire, illness or injury often rely on a hands-on regulator to make insurers keep their promises and help them rebuild quickly after an unforeseen disaster.

Government Associations Supporting State Regulation

Governors' Opposition to OFC Letter
(March 23, 2009)

NAIC Letter to NGA Supporting State Regulation
(August 28, 2007)

Governors Perdue and Sebelius joint letter to all Governors
(October 17, 2007)

NGA 2007 Economic Development and Commerce Committee Policy Position

NGA Letter to House Financial Services
(July 11, 2005)

Joint NGA and NCSL Statement Opposing the "National Insurance Act of 2006
(July 10, 2006)

NCSL Policy Statement Opposing Federal Insurance Regulation

NAAG Resolution Preemption of State Insurance Regulation and Supporting Repeal of the Insurance Industry's Exemption from Federal Antitrust Laws
(June 2007)

CSG Resolution Opposing Federal Insurance Chartering
(June 13, 2007)

NCOIL Letter to Senators Sununu and Johnson Opposing Optional Federal Charter
(July 21, 2007)

NCOIL Press Release on Letter to Senators Sununu and Johnson Opposing Optional Federal Charter
(July 24, 2007)

NCOIL Press Release on Letter to NGA to Support State Regulation of Insurance
(August 24, 2007)

2006 NCOIL Model State Resolution
(February 25, 2006)

4/12/07 NCOIL Letter to U.S. Chamber of Commerce
(April 12, 2007)

State Resolutions Supporting State Regulation

Alabama Resolution Opposing Federal Regulation of Insurance

Alaska Resolution Opposing Federal Regulation of Insurance
Adopted

Colorado Resolution Opposing Federal Preemption of State Regulation of Insurance

Hawaii Resolution Opposing Federal Preemption of State Regulation of Insurance

Idaho Resolution Opposing Federal Preemption of State Regulation of Insurance

Michigan Resolution Opposing Federal Preemption of State Regulation of Insurance

North Dakota Resolution Opposing Federal Preemption of State Regulation of Insurance

Ohio Resolution Opposing Federal Regulation of Insurance

Oklahoma Resolution Opposing Federal Regulation of Insurance

Rhode Island Resolution Opposing Federal Preemption of State Regulation of Insurance

Texas Resolution Opposing Federal Regulation of Insurance

Industry Statements Supporting State Regulation

Independent Insurance Agents & Brokers of America Press Release Opposing Optional Federal Charter

Coalition Opposed to a Federal Insurance Regulator Letter to Congressman Kanjorski Supporting State Regulation of Insurance
(April 5, 2007)

National Association of Mutual Insurance Companies Press Release Supporting State Regulation of Insurance

National Association of Professional Insurance Agents Statement to the Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises of the House Financial Services Committee Supporting State Regulation of Insurance
(October 3, 2007)

 

Committees Active on This Topic
Executive (EX) Committee
Government Relations Leadership Council
Legislative Information
Issue Brief
Optional Federal Charter bill HR 1880
Additional Resources
White Paper: The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation [PDF] – Scott E. Harrington, Ph.D. (Posted with permission from the National Association of Mutual Insurance Companies)
White Paper: Future of the Business Disciplines, Regulation and Oversight of the U.S. Insurance Marketplace [PDF] – Mark Boozell (Posted with permission from the Professional Insurance Agents Insurance Foundation)
 
News Releases
NAIC Testifies on Consumer Financial Protection Agency
6/24/09
NAIC Praises Preservation of State Regulation Under Obama Administration's Plan
6/17/09
NAIC Testifies on Systemic Risk in Insurance
6/16/09
Insurance Regulators Urge Congress to Capitalize on States' Strengths
5/20/09
Sevigny: Royce-Bean Bill Strips States of Consumer-Protection Authority
4/2/09
Geithner Proposal Maintains State Insurance Supervision
3/26/09
AIG: NAIC Corrects Misinformation
3/19/09
NAIC Testifies to Strength of Insurance Regulation
3-17-09
Systemic Risk: Focus of NAIC CEO's Congressional Testimony
3/5/09
NAIC's Vaughan Presents Paper at Insurance Reform Summit
3/5/09
NAIC Responds to Economic Difficulties
1/2/09

Catherine J. Weatherford
Letter to Roll Call Supporting State Regulation

2/13/08