The tangles of conflicting and duplicative state regulations are too confusing, costly and inefficient. State regulators have tried to make things better, but they're often stymied by the forces of protectionism--in the industry and in legislatures--from achieving the goals of harmonization and uniformity.
Two years ago, the AIG bailout led everyone in the industry to believe that federal regulation was coming, and it wasn't going to be optional. State insurance regulators successfully made the case that the insurance affiliates of AIG were safe, secure and well-regulated for solvency. The fact that the Dodd-Frank bill has no new expansive federal insurance oversight is a reflection of that.
Related: Read Ken A. Crerar's previous Sounding Board column, "CIAB's partnership expands analysis."
However, the Dodd-Frank bill did recognize that states can't fix everything. The bill put in place surplus lines reform for multi-state placements after years of our association having fought for them. States hopefully will rise to the occasion in passing laws that conform to the new law and make this commercial insurance marketplace all the more effective.
The new Federal Insurance Office at the Treasury Dept., with its limited preemptive authority, is good progress, carefully crafted and the right move.
Implementation of healthcare reform is critically important and the paramount issue for our member firms. While we have had good interactions with the Dept. of Health and Human Services over the last year, there is still a tremendous amount of anxiety and uncertainty about the future.
The employer-provided group health insurance marketplace always has had some layer of federal oversight, but now it's at a whole new level. In fact, the three most common words in the healthcare legislation are: "The Secretary Shall."
One of the most significant issues going forward is ensuring a place for agents and brokers in the state exchanges. Medical loss ratio calculations, what constitutes a grandfathered plan--it all remains to be seen. Implementation on every level of health care reform matters deeply to our members. And it should to you, too.
Will there ultimately be an optional federal charter? We believe there should be, and we've supported it for more than 20 years. But the devil you know may be better than the one you don't. If states want to ward off such a threat, the pressure is on now. It's up to them to make producer licensing better and easier; to make surplus lines work; to rationalize a marketplace that has been interstate and international and growing more so; to get rid of laws that protect local players from competition, including wildly anti-consumer anti-rebating statutes. The time is now to get rid of the vestiges of protectionism. States can and should rise to the occasion.
Related: Read "The OFC that wouldn't die."
