NU Online News Service, June 24, 2:24 p.m. EDT
WASHINGTON–New federal protections administered by any new federal consumer protection agency would create "a duplicative, inefficient system that would add even more costs for consumers," a property and casualty industry official told the House Financial Services Committee.
David Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI), said in testimony today that such oversight would offer "little or no benefit."
Ralph Tyler, Maryland insurance commissioner, agreed, citing the multitude of systems the state insurance regulatory system has in place to protect consumers.
Mr. Sampson and Mr. Tyler were testifying at a hearing on whether a new federal Consumer Financial Product Safety Commission that the Obama administration wants to create should include oversight of insurance products.
However, Travis Plunkett, legislative director of the Consumer Federation of America, and Edmund Mierzwinski, consumer program director of the U.S. Public Interest Research Group, said that they would recommend that "strong consideration be given to providing the proposed agency with jurisdiction over insurance products that are central or ancillary to credit transactions, such as credit, title, mortgage and forced place insurance."
The comments were made at the opening hearing before the House Financial Services Committee on the Obama administration's proposal that a separate federal agency be created to oversee consumer protection of financial products.
The hearing was critical because the Obama administration "white paper" outlining its proposed changes is silent on whether oversight of insurance products should be authorized for the new agency.
Under the "white paper," the new agency would assume the authority now held by a unit of the Federal Reserve Board.
In his testimony, Mr. Sampson said that "new federal standards will not improve upon the present state-based system."
He argued, "Through the strong system of consumer protections property and casualty insurers provide peace of mind to consumers in their decision-making process and use of insurance products."
Mr. Sampson mentioned what he said are extensive, comprehensive protections already in place to protect insurance consumers.
Mr. Tyler testified primarily on whether the new agency should be given oversight over variable annuities sold by life insurance companies, as proposed recently by Treasury Secretary Timothy Geithner and Laurence Summers, director of the National Economic Council in the White House.
But, Mr. Tyler did cite in his testimony the market conduct, producer licensing, rate and forms oversight provided by state regulation. He also cited the anti-fraud and criminal investigation activities of state insurance regulation.
He said states have developed a wide range of consumer protection tools designed around "complex products and unique interactions between insurers and policyholders."
"For these reasons, we believe a new agency to regulate consumer protections in insurance is not necessary and would cause the kind of overlaps that lead to preemption of state laws and rules designed specifically to address the complexities of insurance," said Mr. Tyler.
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