Insurance Industry Reacts to President’s Financial Service Regulation Reform Proposals

Insurance industry associations and observers reacted to the White House's proposals to reform financial services regulation, which President Obama outlined in a press conference this afternoon. The President's plan, detailed within a white paper distributed by the U.S. Treasury Department, calls for federal supervision of financial services companies that could present systemic risk to the financial system; the strengthening of capital adequacy standards; the creation of a Consumer Financial Protection Agency; and the establishment of an Office of National Insurance within the Treasury Department, among other proposals.

Frank Keating, president and CEO of The American Council of Life Insurers (ACLI) issued a statement saying that the President's plans to increase oversight of the insurance industry "will set us on the right path towards a modern, efficient and consumer-oriented regulatory system." Keating characterizes the current state-based insurance regulatory system as "riddled with inefficiencies, inconsistencies and barriers to competitiveness" and expressed appreciation to the Treasury Department's commitment to creating a modern, nationally uniform and effective regulatory regime. Keating also stresses the Treasury whitepaper's identification of optional federal charter as a possible element within modern regulatory system and applauded the proposal to create an Office of National Insurance as a "first step towards the eventual establishment of a federal functional insurance regulator that will directly regulate federally chartered insurers."

The National Association of Mutual Insurance Companies (NAMIC), in a statement from the organization's president and CEO Charles M. Chamness, observed that the structure and limited proposed Office of National Insurance closely resembled an Office of Insurance Information, which NAMIC has endorsed and is currently pending in the House of Representatives. "Since the paper does not propose assigning regulatory authority to the ONI, we believe that 'any new insurance regulatory regime' refers to regulatory reforms that potentially could be undertaken within the existing state-based regulatory system, which the paper leaves undisturbed and fully intact," Chamness comments.

While expressing appreciation for the Obama administration's efforts, NAMIC's Chamness also emphasized what he characterized as the Treasury Department white paper's implicit recognition that P&C companies exceptional performance during the financial crisis and drew a distinction between such companies and AIG, which he identified as a financial holding company.

The Independent Insurance Agents & Brokers of America (IIABA or the Big "I") president and CEO Robert Rusbuldt says the organization supported what he called the President's decision not to propose a complete overhaul of insurance regulation.

"We are pleased that the Obama administration's proposal retains the current state regulatory system and does not directly call for the creation of a federal regulator," Rusbuldt comments. "The proposal clearly states that any changes to the insurance regulatory system that weaken or undermine important consumer protections should be discarded, and we will continue to press the point that the state regulatory system has done and will continue to do a solid job of protecting consumers and ensuring that they receive the insurance coverage they need. Of course we will continue to work for more efficiency and uniformity in the regulatory system as well."

The organization expressed qualified support for some kind of national insurance body.

"If crafted properly, IIABA could support the creation of an Office of Insurance Information as it has been previously introduced in Congress," says Charles Symington, Big "I" senior vice president of government affairs. "We are optimistic that the President's plan will not be used as a precursor to federal regulation and that this proposed ONI will be designed to work with the existing state system to protect consumers and the marketplace and ensure international coordination."

Matthew Josefowicz, director of Novarica's insurance practice, suggests that insurers should closely watch the development of the prosed Consumer Financial Protection Agency. Depending on how this element develops, insurers could be directly affected in areas like sales practice, suitability, and even claims," Josefowicz comments.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio