Federal Insurance Office Modernization Conference Anticipates Report Due January

Federal Insurance Office (FIO) Director Michael McRaith listened attentively to a wide range of opinions about the potential role of the FIO at a meeting at the U.S. Department of Treasury on "Insurance Regulation in the United States: Modernization and Improvement" on December 9. The meeting precedes a report required by the Dodd-Frank Act due Jan. 2012 on how to modernize the insurance industry.

Deputy Treasury Secretary Neal Wolin led off the meeting with remarks on the role of the FIO as mandated by Dodd-Frank, particularly as correcting the "glaring omission" of a central federal "repository for comprehensive insurance expertise."

Wolin characterized state regulators as "important partners in our work." He also announced the establishment of the Federal Advisory Committee on insurance, as well as the appointment of 15 insurance experts to that committee, and noted that the FIO recently became a full member of the International Association of Insurance Supervisors (IAIS).

During panel discussions, Daniel Schwarcz, associate professor of law, University of Minnesota Law School, asserted that "very little attention has been paid to transparency, making sure consumers have a reasonable understanding of what they're buying." For example, he explained, it was impossible to meaningfully compare the coverages of different insurers homeowners policies.

John T. Hill, II, CEO of P&C carrier Magna Carta Companies (New York) commented that the FIO could perform three positive roles: to be a voice on the international scene to bring understanding to the complex U.S. market, ensuring that foreign regulators not push inapplicable structures on the U.S. insurance industry; to provide a "bully pulpit" for improving the current system by "shining a spotlight on specific problems that need to be addressed"; and to work with other federal agencies to prevent harm to the industry and the customers it serves by parties who "don't understand our industry."

John D. Johns, CEO of Protective Life Corp. (Birmingham, Ala.), criticized current state regulatory system, saying that the National Association of Insurance Commissioners (NAIC) was "too bottom-up in structure" and subject to too much turnover, observations that other panelists affirmed. Johns also bruited the notion of a "passport" system to enable a company to do business across the country, overriding the state-based insurance regulatory system.

Janice Abraham, president of United Educators (Chevy Chase, Md.) urged avoiding the repetition of mistakes made in banking regulation that could harm smaller companies. "Let's have no duplicative, overlapping or contradictory insurance regulation, please," she said.

There were few surprises in the opinions expressed during the meeting, which was largely a rehearsal of now familiar tropes, according to Howard Mills, chief adviser for Deloitte's (New York) national insurance group.

"There weren't any big 'aha!' moments," Mills comments. "However I do think the event was significant in that it was first meeting ever within the U.S. Treasury with a federal official charged with having a role in the regulation of insurance."

Mills notes that FIO director Michael McRaith listened rather than participated in the discussions, and was very engaged and cordial.

"He showed that he was looking at this very seriously, and gave observers reason to expect a reasonable report," Mills says. "I don't think they're fearful of any big 'bombs' that will massively disrupt things. People are hopeful that he will focus on issues like harmonization of state procedures and approvals that could benefit the industry and its consumers."

McRaith said that the report due in January 2012 will be issued on time. Dodd-Frank required that the report be issued within 18 months of the Act's being signed into law on July 21, 2010.

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