Bill For Fed Insurance Agency Reveals Agent, Insurer Rift

A House bill to create a Treasury Department agency that would provide insurance expertise for government officials is highlighting a conflict between property-casualty insurers and agents over a possible federal role in insurance regulation.

Responding to yesterday's introduction of the Insurance Information Act of 2008 (H.R. 5840), the American Insurance Association and the Council of Insurance Agents and Brokers voiced support, while the Independent Insurance Agents and Brokers of America said they would oppose it.

The bill would create a federal Office of Insurance Information within the Department of the Treasury to provide advice and expertise on insurance regulation to the executive branch and Congress.

Four members of the House Financial Services Committee--Rep. Deborah Pryce, R-Ohio; Rep. Ed Royce, R-Calif.; Rep. Melissa L. Bean, D-Ill.; and Rep. Dennis Moore, D-Kan.--joined Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Service Committee's Capital Markets Subcommittee, as original co-sponsors of the legislation.

The bill mandates that the new agency:

o Collect and analyze data on insurance.

o Advise the Secretary of the Treasury on major domestic and international policy issues.

o Report to Congress every two years.

o Establish federal policy on international insurance matters.

o Ensure that state insurance laws remain consistent with federal policy in coordinating international trade agreements.

According to Mr. Kanjorski, the bill would also establish an advisory group to help inform and advise the head of the new office. Those represented in this group would include state regulators, consumer groups and groups in the insurance industry.

"The current state structure of our insurance industry offers many advantages, but it often impedes and complicates our ability to compete in the global marketplace," said Rep. Pryce.

"To remove this competitive disadvantage, one voice is needed to advocate for America's insurance interests," she added.

Marc Racicot, president of the American Insurance Association, said "an Office of Insurance at the federal level will provide a national perspective to what is now a national and a global industry."

He added, "This office will help develop much needed uniformity in insurance policy and provide both the expertise and a federal voice for the U.S. in international regulatory policy making and trade agreements."

Ken Crerar, president of the CIAB, said Rep. Kanjorski's initiative is "progressive, thoughtful and right on target."

Joel Wood, CIAB senior vice president for government affairs, said in a note to members that "the bill takes a leap forward in the long-stalled debate over the extent of federal insurance regulation."

He added that Rep. Kanjorski has been pushed and pulled by advocates on both sides for years, but "has now staked out the top leadership role in introducing legislation that would create a federal presence in insurance regulation--albeit a limited one--that actually has a chance of enactment."

But Robert Rusbuldt, president and CEO of the IIABA, said the trade group is "very concerned" with the bill.

"The OII would create a dual regulatory system," Mr. Rusbuldt said. "It is not optional, and it creates another layer of regulation and oversight on top of the current insurance regulatory system."

Charles Symington, IIABA senior vice president, government affairs, added, "The OII would have considerable authority to preempt state laws and establish federal insurance policy, negatively impacting the state insurance regulatory structure."

Additionally, he said, Rep. Bean, D-Ill., and Rep. Royce, the only sponsors of the House optional federal charter legislation and original sponsors of H.R. 5840, indicated at the insurance hearing that they believed "an OII would be a step toward OFC. This clearly causes us great concern."

Justin Roth, a senior lobbyist for the National Association of Mutual Insurance Companies, which opposes an OFC, said that "in order to have expertise on insurance at the federal level, it is unnecessary to create a new federal bureaucracy such as the proposed OII."

Mr. Roth said that "from the recent Blueprint to their involvement in the TRIA [Terrorism Risk Insurance Act] debate, it appears there is a great deal of expertise on insurance issues within the Treasury Department without the need for creation of a new federal agency."

He added, "While we've not had the opportunity to thoroughly review the legislation," NAMIC is "concerned" about this proposal.

He also reiterated Mr. Symington's concern about the comments of Rep. Royce and Rep. Bean about the act being the "first step in the move toward a federal regulator."