Mirel: Courts, Congress Threaten State Regulation

Mirel: Courts, Congress Threaten State Regulation

By Matt Brady

NU Online News Service, Oct. 28, 11:55 a.m. EDT?Major challenges to insurance regulation by the states are looming on the horizon from courts and Congress, according to Lawrence Mirel, commissioner of the District of Columbia Dept. of Insurance Securities and Banking.[@@]

Speaking at the annual meeting of the Property and Casualty Insurers Association of America here, Mr. Mirel said regulators will have to deal with problems of court regulatory interference through multi-state class actions and from Congress' work towards reforming the state-based regulatory system.

Mr. Mirel noted that he was not speaking for the National Association of Insurance Commissioners, adding jokingly that not being an NAIC officer gives him the right to say what he thinks.

Class action lawsuits, he said, "are a major threat that I think is not fully understood even by some members of the NAIC."

As an example, he noted that a class action ruling on aftermarket parts in a court in southern Illinois could have an effect on his jurisdiction. Much of this, he said, is due to the fact that court decisions in class actions have the effect of legislative actions by enacting public policies. The role of the court system is to interpret the law, he said, "but the purpose of many class action lawsuits is to change public policy."

Perhaps more daunting for state regulators is the ongoing effort by Congress, specifically by Reps. Mike Oxley, R-Ohio, Chairman of the House Financial Services committee, and Richard Bake, R-La., who chairs a key subcommittee to reform the state regulatory system from Washington.

Although acknowledging that he was likely in the minority in the NAIC on the issue, Mr. Mirel said legislation proposed by Mr. Oxley and Mr. Baker to establish federal standards for insurance regulation, known as the SMART Act, is a "very good beginning effort."

The important aspects of the law, Mr. Mirel added, is not what is included in the bill, "but what it does not contain," specifically a federal regulator or an optional federal charter.

Mr. Mirel said that it was clear that Reps. Oxley and Baker are not trying to eliminate the state regulatory system, and that their efforts should be accepted by the NAIC. The SMART Act," he said, "presents an opportunity for the NAIC, and it's an opportunity we should embrace."

Mr. Mirel said state regulators, even those opposed to the SMART Act, may not be the strongest voice of opposition. This could come from state legislators who view the bill as an encroachment on their territory.

"There aren't a lot of areas left where state legislators have a lot of power," he said. "This is one of them, and I don't think they'll want to give it up."