Federal Insurance Regulation:

Insurance regulation and the federal government probably never entered your mind at the same time, but you may need to change the way you think. Currently, each state regulates rates, agent and company licensing, company financial oversight and pretty much everything related to insurance. This allows states to affect laws and regulations that take into account regional issues. Although it's not a perfect system, it's still a lot more responsive than federal government usually is.

Over the past few years, major national insurers have been pressuring Congress to take control of insurance regulation. The first proposal, the optional federal charter for insurers, would essentially allow insurers to decide whether to be regulated by the states or by the federal government. If an insurer decides to go with the federal oversight, then the company would be exempt from state regulations.

Another element of the campaign for federal insurance regulation is the misleadingly named Insurance Information Act of 2008 (H.R. 5840). When this bill was first introduced, it was presented as the answer to a need to have a source of information about the insurance industry, similar to a library. But then H.R. 5840 began to morph. By the time the bill emerged from the House of Representatives Capital Markets Subcommittee this summer, it had been changed significantly.

The bill, as it is currently written, effectively puts the U.S. Treasury Secretary in charge of most insurance matters in the country, with the final authority for insurance issues of national interest, and the power to determine which state laws, regulations, and industry practices will be preempted. The bill effectively guts the McCarran-Ferguson Act of 1945 and the Gramm-Leach-Bliley Act of 1999, which establish and affirm that the states are the regulators of the business of insurance.

The bill's supporters say that it is actually a narrow bill that does not pose a threat to the authority of the states in insurance regulation. But that is not reflected in the language of the bill. Fortunately, as more state officials, governors, attorneys general, legislators, and state insurance officials fully review it, stronger opposition mounts.

“This goes way beyond simply creating an insurance information office,” said PIA of Florida president Phil Zelman. “The current version of this bill would effectively allow the Secretary of the Treasury to review and amend the laws and practices relating to insurance here in Florida and in any other state. That it simply unacceptable.”

Federal involvement is being marketed as a way of making insurance regulation more efficient. Some would argue that centralizing control of anything is better, but we need only look as far as the recent sub-prime mortgage meltdown to question that. That occurred under federal regulation, and at the same time that the insurance industry under state regulation remained on a firm financial footing, achieving record profits and lower prices for consumers.

The last thing we need is a new federal bureaucracy. Local insurance agents deserve local insurance oversight-where we can keep a closer eye on it.

We must never forget that even though modernization of state-based oversight must continue at the state level, the current system is far from being broken and has yielded an insurance industry that is the envy of the world. Our success is also the envy of big banks and large securities firms, who are major movers behind the drive to replace state oversight with federal regulation. They want the success we have achieved, but instead of competing with us on a level playing field, they want the field tilted in their direction.

Our fight to support state regulation is not just about Florida agents. It's about our responsibility to our friends and neighbors, who are our clients. If the kind of personal service and caring that we provide becomes another casualty of the push to make everything into a commodity, consumers will lose something they value highly: the ability to protect their dreams by working with Main Street agents who truly care about them.

When it comes to control of the insurance industry we can no longer ignore what is happening in Washington — and we won't.