Recap – Additional Perspectives On The Need For Insurance Regulatory Reform

 

On October 30, 2007, Congressman Paul E. Kanjorski (D-PA), Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises (“Subcommittee”), presided over the second of a series of hearings on insurance regulatory reform.

“Our initial hearing reiterated my belief that insurance regulation remains a complex issue in need of reform…Taking into consideration the views of all parties involved in and affected by insurance constitutes an important step before taking any action.  These hearings will help the Subcommittee to devise the most beneficial and practical policy decisions for consumers of insurance products,” said Chairman Kanjorski.

“This Subcommittee remains committed to dedicating our full energies to move the U.S. insurance market forward.  We cannot allow our regulatory structure to continue to disadvantage consumers and hinder innovation,” said Congresswoman Deborah Pryce (R-OH), Ranking Member of the Subcommittee.

During opening statements, it was noted that a state-regulated insurance market, as is the current structure, slows down the insurance industry.  In the Subcommittee’s view, the federal government has yielded to the state governments with respect to insurance matters for 136 years and to date, the fundamental problems have yet to be addressed.

There were no decisions made at this hearing, it was simply a forum for discussion.  The following six (6) witnesses provided testimony and responded to questions:

• The Honorable Craig Eiland, Texas House of Representatives, testifying on behalf of the National Conference of Insurance Legislators;

• Mr. Alessandro Iuppa, Senior Vice President, Government & Industry Affairs, Zurich, testifying on behalf of the Financial Services Roundtable;

• Mr. J. Robert Hunter, Director of Insurance, Consumer Federation of America;

• Mr. Scott Gilliam, Assistant Vice President & Government Relations Officer, The Cincinnati Insurance Companies; and

• Mr. John W. Felton, President, Tennessee Brokerage Agency, testifying on behalf of the National Association of Independent Life Brokerage Agencies.

Also available are the statements of Chairman Kanjorski and Congressman Manzullo.

 

Main Points Addressed:

• Florida is the 8th largest insurance market in the world and as such, it probably will not give up its regulatory power easily;

• There is a need for rate and form uniformity, as well as a need for a single insurance code;

• There are regulatory inefficiencies in the state systems and congressional action is necessary given that states have been unable to adopt meaningful reforms on their own;

• The idea is not to dismantle the state regulatory systems but to instead have an optional federal charter;

• Consumers do not care whether the federal or state government regulates insurance, as long as the regulation is fair;

• There is no uniformity if there is a tiered, dual system in operation;

• HR 1065 passed the United States House of Representatives and is now pending before the United States Senate;

• Insurance market inefficiencies are costly to consumers and it is more efficient for insurers to work with one federal rather than fifty state regulators;

• National oversight of reinsurers is needed; and

• Consumers are currently facing the following issues:

o Claims abuses;
o Unfair or excessive prices coupled with arbitrary criteria such as credit scoring;
o Collusion or hidden kick-backs;
o Lack of information;
o Failure of regulators to be independent;
o Only the state of Texas requires that consumers be provided a Bill of Rights; and
o Only California controls “built-in” expenses.

 

 

 

The foregoing is a brief summary of the discussions during the hearing and is not intended to be a comprehensive review of the items contained herein.  Should you have any questions, please feel free to contact this office.