A global market intelligence firm is charging that the Independent Insurance Agents and Brokers of America is lobbying against federal regulation out of fear that a national oversight system would facilitate more direct sales via the Web and telephone, thus bypassing its members. Are they serious or delirious?
“The Independent Insurance Agents and Brokers of America is asking…to keep the state-based regulatory structure intact, stating that it is the best way to protect the consumer,” Jonathan Steiman, an analyst in the financial services technology sector for Datamonitor, wrote in a Feb. 17 “Independent Analyst Comment” that was e-mailed to me.
The statement went on to charge that the IIABA's “recommendation to keep the state-based regulatory structure intact is not wholly in the interest of the consumer…Indeed, the current regulatory regime favors agents and brokers, at the expense of the consumer, by making it difficult for insurers to sell direct.”
Datamonitor contends that while the IIABA emphasizes its concern for consumer protection, it has a hidden agenda that is far more self-serving.
“IIABA's reasons for opposing the development of an effective federal regulator are simple,” according to Datamonitor. “A federally-regulated insurance commission would accelerate the amount of premiums sold direct over the Internet or through call centers. This is good for both insurers and consumers, but terrible for agents and brokers, which has provoked the IIABA's tenuously argued opposition.”
Datamonitor contends that forcing insurers to apply for licenses in every state discourages them from launching nationally-branded, direct sales campaigns, thus insulating state-licensed independent agents from fair competition.
“In short, the current regulatory regime is a classic barrier to entry, [as] enterprising players with hopes of selling direct cannot achieve the proper scale,” according to Datamonitor. “Furthermore, existing national insurers with agent forces do not have great fears of new entrants selling direct, therefore they do not have the incentive to take the risk of moving away from their agent force and towards a direct-to-consumer strategy.”
Datamonitor concluded that “IIABA's opposition to a national regulator has little to do with the consumer, and everything to do with protecting the status quo of the U.S. insurance industry.”
The analyst added that “this is a shame, because the status quo elevates the cost of compliance for insurers, which is inevitably passed on to the consumer. But even worse, the status quo hinders the growth of direct distribution, which is what today's customers want and tomorrow's customers will come to expect.”
Datamonitor has got to be kidding! Their argument is a real stretch at best, and utterly ridiculous at worst.
To suggest that the Big I is merely arguing against federal regulation to prevent the growth of Internet and telephone sales is crazy!
I would even argue with Datamonitor's basic premise–that consumers are clamoring for more direct sales. NU's annual surfing surveys to see what it's like to try to buy insurance on the Web have revealed that the process is anything but easy, and that consumers are at great risk of being misled and overcharged when shopping online.
When you add in the complications of understanding even the most basic coverage, I wouldn't recommend anyone buying insurance online, without any expert advice or guidance.
I suppose Datamonitor thinks consumers are getting ripped off having to pay an agent to help them, but I would argue that you get what you pay for. Cut out the agent, and you are on your own. Good luck with that!
The Big I's fundamental argument, which Datamonitor casually rejects out of hand as “tenuous,” is that states have basically done an excellent job regulating insurance. Indeed, insurance is the least of the country's problems right now–with the federally-regulated banking and securities industries in far worse shape.
I cannot imagine what prompted Datamonitor to take on this crusade–unless their goal is to pitch their expertise and services to carriers looking to go direct. (The e-mail did advertise Datamonitors report–Catching Up: Online Direct Sales in U.S. Personal Lines Insurance–authored by Mr. Steiman.)
But whatever the firm's motivation, Datamonitor's argument is misinformed and misguided, in my humble opinion.
What do you folks think?
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