Advocates of continuing state regulation for the insurance industry have a strong ally in one of Maine's U.S. senators, who told an agent group here she opposes an optional federal charter for carriers and producers.
“I believe the present system of state regulation largely works. The answer is not to disrupt that system by concentrating more power in Washington, D.C.,” Sen. Susan Collins, R-Maine, told the Independent Insurance Agents and Brokers of America Legislative Conference and Convention.
Sen. Collins–who for five years headed the state's Department of Professional and Financial Regulation, which oversees Maine's Bureau of Insurance–said she, unlike the majority of members in Congress, understands the industry and believes most states handle regulation “quite well.”
Creation of a federal system would eventually “overwhelm” state regulation, making it ineffective and effectively nonexistent, she warned.
Sen. Collins spoke in response to recent calls by Treasury Secretary Henry M. Paulson Jr. to include the creation of an optional charter for both life and property-casualty insurers and producers as part of the Bush administration's proposed financial services regulatory reform package.
Sen. Collins said the news that insurance would be in the reform plan came as a surprise to her, adding she did not believe it should be included with banking and securities regulatory reform.
“Certainly the ongoing struggle in the insurance sector needs to be addressed, but I fail to see how the crisis in the housing and financial markets justifies the reach of federal regulators into the insurance industry,” she said.
She called on agents and brokers to use their knowledge and influence to speak to their federal representatives and inform them of the benefits in keeping state oversight intact. “Your continued advocacy on this point, now that Secretary Paulson has embraced this proposal, is going to be absolutely critical,” she said.
On natural disaster coverage, Sen. Collins said the government should not subsidize those who choose to live in catastrophe-prone areas. She called for greater effort to solve the problems facing the National Flood Insurance Program and the challenges from other natural disasters, declaring that the private insurance industry is ahead of the federal program in adequately assessing risk.
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