Insurance Buyers Don't Need Federal Protection, PCI Says

Creating a new federal consumer protection agency for insurance would result in "a duplicative, inefficient system that would add even more costs" for buyers, a top property and casualty industry official warned Congress last week.

Indeed, such additional oversight would offer "little or no benefit," David Sampson, president and chief executive officer of the Property Casualty Insurers Association of America, said in testimony before the House Financial Services Committee.

In his testimony, Mr. Sampson said that "new federal standards will not improve upon the present state-based system."

Mr. Sampson, citing what he characterized as extensive, comprehensive protections already in place to protect insurance consumers, argued that "through the strong [state] system of consumer protections, property and casualty insurers provide peace of mind to consumers in their decision-making process and use of insurance products."

Maryland Insurance Commissioner Ralph Tyler agreed, citing the multitude of systems the state regulatory system has in place to protect consumers.

Mr. Tyler testified primarily on whether the new federal 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.

However, 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.

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 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."

These would include such products as credit, title, mortgage and "forced-place" property insurance purchased by a bank or creditor on an uninsured debtor's behalf.

The comments were made at the opening hearing before the House Financial Services Committee on the Obama administration's proposal.

The hearing was seen as 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.