Financial Reform to Override State Insurance Regulation?
"For over 135 years, insurance has primarily been regulated by the states, which has led to a lack of uniformity and reduced competition across state and international boundaries, resulting in inefficiency, reduced product innovation, and higher costs to consumers." - The Department of Treasury

State predominance in the regulation of insurance companies could be significantly altered by the financial reform legislation under consideration. Plans call for creating an Office of National Insurance (ONI) within Treasury. ONI's functions would include "monitoring all aspects of the insurance industry."

One of the most interesting aspects of the reform plan is with respect to global regulation of the insurance industry. ONI would be "empowered to work" internationally "to better represent American interests, have the authority to enter into international agreements, and increase international cooperation on insurance regulation."

Some watchdogs, not to mention state officials, are already having conniptions over the international aspect of the proposal. For example, in their usual chuckle-worthy hyperbolic style, Public Citizen asks whether the ONI would be "subverting democracy" and calls for preventing "this dangerous seizure of state and congressional authority."

An official with the Maine Citizen Trade Policy Commission warns that the ONI is "a dangerous thing." Similarly, Maine's insurance superintendent said that "at a time when we've seen unregulated markets collapse, this is not the time to try to deregulate insurance."

By contrast an official with the American Insurance Association said that the US needs to "speak with one voice in international negotiations concerning insurance regulation. Otherwise we'll continue to lose opportunities for our businesses overseas and lose the potential for creating jobs here."

Any efforts to nationalize insurance oversight need to be weighed carefully against traditional state prerogatives. In the balancing process, however, ensuring the national and global strength of a major US industry has to be a priority.

See "Financial Regulatory Reform: A New Foundation"