WASHINGTON–The chairman of the House Financial Services Committee said today that supporters of federal insurance regulation should expect an increased focus on consumer protections to come with it.
Speaking at the Networks Financial Institute’s Annual Insurance Reform Summit in Washington, Rep. Barney Frank, D-Mass., advised optional federal charter supporters to “think about what conditions you would accept with it, because there will be some.”
Specifically, Rep. Frank said that the issue of consumer protections would be a key to any proposal, as lawmakers will be hesitant to support any legislation that might ultimately do more harm to themselves than good.
“There is a reason why you do consumer protections,” he said. “Because if you don’t, people won’t vote for you, but if you do, they will.”
Among the possibilities, he noted, would be a requirement that companies offering a line of coverage in one state also be required to offer the different lines they offer elsewhere, he said, or a possible “all perils” policy for property insurance that would include flood exposure.
Rep. Frank said that he did not agree with the notion that potential federal consumer protections necessarily needed to be as high as the most stringent state regulations, arguing instead that the overall benefit should be considered.
It would be acceptable, he explained, if citizens of one or two states lost some protections under a federal regulatory scheme if the same scheme raised the level of protection for consumers in 29 other states.
Lawmakers who introduced OFC legislation in both chambers during the last Congress also spoke at the event, expressing confidence that their legislation would ensure that consumers are adequately protected.
Sen. John Sununu, R-N.H. who introduced legislation in the Senate during the 109th Congress with Sen. Tim Johnson, D-S.D., said that there is “no question that we can provide uniformity of regulation at the federal level” while maintaining strong consumer protections.
Sen. Sununu said that he intends to introduce a new version of the bill, most likely in April, and that under his proposal, “the state would still carry all its powers” to ensure that companies follow good business practices. Additionally, he noted, the bill would establish an ombudsman at the federal level to help consumers with their complaints.
Rep. Ed Royce, R-Calif, who introduced the House version of the OFC bill in the last congress, also said he intends to bring the bill back this year, and it will contain “a number of provisions to ensure that a federal regulator would be on par with other world class financial services regulators” such as the Securities and Exchange Commission and the Office of the Comptroller of the Currency.
In many ways, Rep. Royce said he believes the market will prove to be a better regulator than any of the states, but he noted that a federal regulator would have access to more data and be in a better position to track company practices and industry trends to weed out potential problems.
However, Alabama Insurance Commissioner and National Association of Insurance Commissioners’ president Walter Bell questioned whether a federal regulator’s view of the big picture would distract them from smaller incidents.
While a major event such as Hurricane Katrina can stay on the national radar for weeks, he said, smaller events–such as the tornado that struck Enterprise, Alabama, last week–tend to fade into the background after a few days. Mr. Bell said that Alabama insurance department personnel have “been on the ground” there since the day of the storm.
“In the state of Alabama, we have been more responsive than any federal regulator ever could be,” he added.