Patriot Act Threat Remains
The property-casualty insurance industry is breathing a sigh of relief now that the U.S. Treasury Department has left p-c insurers and producers out of proposed rules to combat money laundering. The last thing the financially-challenged p-c industry needs right now is a new set of government regulations to follow, complicating their operational efficiency and driving up costs–particularly if such regulations would be misplaced.
For now, at least, the proposed rules apply only to life insurers and "any other insurance company that offers products with investment features or features of stored value and transferability."
The rule is prompted by the USA Patriot Act, passed by Congress after the Sept. 11, 2001, terrorist attacks so that the government can stop funds from flowing to terrorist organizations.
Exempting p-c entities makes a lot of sense, and we applaud the Treasury Department for not simply painting the entire insurance industry with one broad brush.
The p-c industry had been lobbying Treasury officials to leave their carriers out of the rule because p-c products simply do not lend themselves to money laundering. Property-casualty policies are not investment products. Policyholders must report a loss of some sort to collect on their coverage. Thus, p-c policies would be of limited value to would-be money launderers.
While it is always possible that someone might try a financial scam with a p-c entity, p-c insurers are already subject to state anti-fraud regulations, and have extensive fraud-fighting special investigative units of their own to expose wrongdoers.
Property-casualty agencies would also be a difficult place to launder money because of state oversight and how their business is structured.
Still, this doesn't mean p-c insurers or producers can afford to turn their attention to other matters. The proposed rules are not final. Indeed, Treasury is seeking input during its comment period on whether the rule should apply to entities other than those cited.
Thus, p-c insurer and producer groups need to keep their guard up and keep pressing their case. With the federal government playing fast and loose with civil rights these days in the name of fighting terrorism, p-c players cannot take it for granted that anyone will end up exempt from further regulatory and investigatory demands.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 30, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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