Insurance commissioners oppose US federal regulation
By Jui Chakravorty Das
NEW YORK, March 30 (Reuters) - As U.S. Treasury Secretary Henry Paulson gets ready to unveil plans on overhauling the regulation of markets on Monday, one group is already lining up in the opposition camp: state insurance commissioners.
One of the items on the treasury department's blueprint for a massive shake-up of U.S. financial market regulations calls for the creation of a federal insurance regulator.
States currently have the authority to oversee insurers, and although efforts have been made to standardise forms and other requirements, many differences persist between states.
"I think we've demonstrated over the years that state-based regulation is the most effective way to protect our consumers," Sandy Praeger, president of the National Association of Insurance Commissioners, said in a telephone interview.
"Efficiency at the cost of consumer protection is I don't think where we want to go."
Praeger, who said she was speaking on behalf of all state insurance commissioners, said it was important to have people at the state level who could ensure that products were appropriate and could explain them to customers.
"You want consumers to understand what they are buying ... You want someone to make sure the rules are easy to understand and appropriately represent the product being sold," she said.
Under the treasury department's proposal, a new federal insurance regulator would have oversight of insurance firms that chose an "optional federal charter".
There would be a system of federal chartering, licensing, regulation and supervision for insurance agents and brokers. However, state-based regulation of insurance would continue for those not electing to be regulated at the national level.
States would not have jurisdiction over those electing to be federally regulated.
Several major insurance companies, who complain that having to deal with 50 different regulators is inefficient and expensive, applaud the proposal.
"Providing insurers with the option of a single regulator for insurance will benefit consumers and will be more efficient, effective and rational, given the 'increasing tension' a state-based regulatory system creates," Marc Racicot, president of the American Insurance Association (AIA) and former governor of Montana, said in a statement.
The AIA represents about 350 major insurance companies providing property and casualty insurance.
Regional firms and insurance agents counter that supporters are engaged in regulatory arbitrage, seeking less regulatory oversight and diminished consumer protection.
Praeger said another concern was that the new structure could result in many job losses from the state departments, which employ 10,000 workers.
"If taken to the extreme, many of the state departments would close down and many people would lose jobs," Praeger said.
The support for the federal charter marks the first time the Bush administration has officially weighed in on the long-running debate over insurance regulation.
Major U.S. insurance companies and brokerages include AIG American International Group (AIG.N), Marsh & McLennan Companies Inc (MMC.N) and MetLife Inc (MET.N). (Editing by Alan Raybould)
