NU Online News Service, Dec. 21, 2:48 p.m.EST

Comments provided to the Federal Insurance Office on howinsurance should be regulated in the future ranged from strongsupport of the current state-regulatory system to calls for thefederal government to play a lead role "if uniformity andconsistency of regulation is to be achieved."

In a lengthy response submitted Monday, the National Associationof Insurance Commissioners cited how comprehensive and detailed thecurrent system of state regulation is.

The NAIC points to the states' comprehensive oversight ofsolvency, market conduct and other processes and programs, andnotes that solvency regulation is different state-by-state becauseit deals with the different needs of insurers and agents in eachstate.

Support for state-based regulation also came from Jimi Grande,senior vice president of federal affairs for the NationalAssociation of Mutual Insurance Companies. He says, "Property andcasualty insurance proved to be among the best regulatedfinancial-services sectors throughout the financial crisis."

He says policyholders of NAMIC member companies "were wellserved and well protected.

"We will continue to support efforts that lead to moreuniformity and streamlined processes, however we will fight any newfederal efforts that will lead to more duplicative or costlyregulations."

The National Association of Professional Insurance Agents saysin its comment letter that it fears any study undertaken by theTreasury Department will inherently support stronger federaloversight, which it opposes.

PIA says it is "strongly opposed to expanded federal regulationof insurance and is in equal measure strongly supportive of amodernized, national state-based system of insuranceregulation."

At the same time, PIA says its members "can be supportive of theFIO" as long as it adheres to the mandate set for it by Congressthat specifies it is not a regulator of the business ofinsurance.

Robert Pierce, CEO of the Michigan Association of IndependentAgents, says it would be "impossible for a new federal agency toreplace the knowledge, effectiveness, and responsiveness" thatstate regulators provide to Michigan consumers.

He also says that an optional system of federal oversight wouldonly increase confusion amongst consumers, create unnecessary costsand increase federal bureaucracy at a time when Michigan residentshave sent a clear message that they desire less federal and statebureaucracy."

But comment letters also showed support for a greater federalrole in insurance regulation.

Late last week, the Risk and Insurance Management Societyoutlined what it sees as the shortfalls in state regulation andcalled for more federal oversight.

Adding to those comments, the Financial Services Roundtable saysin its letter that the federal government must play a "lead role"insurance regulation from now on.

Richard Whiting, FSR general counsel, also says that a majorityof FSR members "believe that the FIO must be a lead voice, not onlyin vetting options, but ensuring that a new era of insuranceregulation does not come with duplicative or layered regulatoryrequirements."

Whiting says, "Clearly, the current system does not promoteoptimal efficiency."

He adds that the current system "also raises questions offairness for consumers when the weight of regulation stiflesproduct innovation, limits customer choices, increases costs andinhibits the development and function of competitive markets."

The American Insurance Association says in its letter thatgovernment rate and form regulations—which are unique toproperty-casualty insurance among competitive U.S.industries—"undermine effectiveness of the state-basedregulation. "

The letter cites some instances where "heavy-handed governmentprice controls, coupled with policies that steer consumers togovernment-run insurers, actually discourage private markets andundercut financial solvency, leaving consumers with fewer optionsand more exposure."

Stephen Zielezienski, AIA senior vice president and generalcounsel, recommends that the FIO study the effects of the U.S. rateand policy form regulation of P&C insurers and the extent towhich such regulation undermines competition in private markets,decreases consumer choice and detracts from the goals offinancial-solvency oversight.

The comments were submitted to the FIO to provide input for astudy on current insurance regulation and how it should bemodernized going forward.