“Your money, or your life?” the old joke goes. “That's easy,” replies the robbery target. “My life–because I will need my money for my old age.”

Property-casualty insurers face a similar, if not quite as draconian choice in deciding whether to keep backing state regulation or succumb to the siren song of free-market pricing under a federal oversight system.

Nothing quite illustrates that paradox better than the career of Ernie Csiszar, who resigned last month just short of his two-year anniversary as president of the Property Casualty Insurers Association of America. Mr. Csiszar joined PCI after a similarly truncated term as president of the National Association of Insurance Commissioners.

As a former insurance commissioner for South Carolina, one can only assume Mr. Csiszar backs the concept of state regulation, but there was no assuming required in his advocacy of free-market pricing for property-casualty products.

That may not have made for smooth sailing at the NAIC. Just about three months into Mr. Csiszar's term as NAIC's leader, Rep. Mike Oxley presented his federal insurance standards program–better known as the SMART bill. While the State Modernization and Regulatory Transparency Act doesn't appear to be going anywhere for now, in April 2004 it looked as if it could be the shape of things to come.

At the time, Mr. Csiszar may have appeared just a little too willing to bend on certain state regulatory prerogatives to gain a seat at the proverbial table with Rep. Oxley, where movers and shakers seemed to be charting the future of insurance oversight–including a three-year transition to free-market pricing nirvana.

Mr. Csiszar's efforts to ingratiate himself with Washington stand in stark contrast with the actions of his NAIC successors, who did not seem quite as eager to get into the game in Washington.

With SMART in limbo and its major sponsor, Rep. Oxley, leaving Congress at year's end, all this may appear to be moot. But just replace the federal standards bill with the optional federal charter proposal, and the same pattern plays out today.

State regulation absolutists will claim that free-market rates and state regulation need not be mutually exclusive. In theory they are right, as efforts to persuade state legislatures to tinker with their prior-approval systems have had some degree of success. However, when compared to the stroke-of-a-pen timeframe of a sweeping, nationwide federal charter bill, I wonder how long the absolutists can hold out.

The tough row free marketers have to hoe in the NAIC evidenced itself this year as efforts to develop a personal lines deregulation model came to naught, when it became apparent that no so-called Illinois-style free-market system would emerge.

Meanwhile, practical political challenges remain. The kind of nationwide free market for insurance envisioned in the OFC proposal would surely send shivers down the spines of Florida homeowners. While it is all well and good to proclaim one shouldn't subsidize those who want to live on the ocean, remember that folks in Florida go beyond The Donald sunning himself in Mar-o-Lago to almost four-fifths of the residents of the fourth-largest state in the union.

So the argument goes on, and with the record catastrophe losses of 2005, it became evident just how high the stakes have risen.

Today the American Insurance Association remains the sole p-c insurer group advocating for an optional federal charter, along with the Council of Insurance Agents and Brokers on the producer side.

At NAIC hearings last month, AIA Assistant General Counsel David Snyder avoided any mention of a looming threat of an OFC as a reason regulators should get with the industry's free-market program, and instead focused on the pure merits of his case. “We have not made the linkage directly, but others have,” he said.

In any event, that does not seem too effective a weapon after the SMART bill turned out to be a paper tiger. And while the current Senate OFC bill is the only one ever to make it into committee (with a companion bill introduced recently in the House), the chances of passage right now also seem pretty slim in the short term.

The circumstances surrounding Mr. Csiszar's abrupt resignation from PCI–following the controversial joining, then defection, of the association from the effort to establish a national catastrophe fund– spotlighted the differences within the industry over what role, if any, the federal government should play in insurance.

However, who knows how long the purported consumer benefits that are at the heart of arguments by state regulation advocates can trump the pure dollars and cents advantage that rate freedom under the feds will supposedly bring the industry.

To return to the dilemma posed at the beginning of this piece, the insurance industry does not appear at the moment to face any danger of failing to live to a ripe old age. But, it also seems fair to say it would just as soon do so with its money.

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