As the idea of enhanced federal involvement in regulation of insurance gains momentum, it’s easy to get caught up in the excitement coming out of Washington and envision what the insurance press might be reporting in a few years. Kathleen Hunter of www.stateline.org recently updated a current controversy concerning federal versus state regulation of banks. We have substituted insurance for banking and insurance company for bank wherever the terms appeared in her story to present a glimpse into our own future:
State officials’ hackles are up over a new federal insurance rule they say erodes consumer protections and favors the federal government in a turf war that’s been simmering for more than a century. A long list of opponents, including the National Governors Association, the National Conference of State Legislatures and the attorneys general and insurance supervisors from all 50 states, is prepared to go to the mat to see the rule rescinded.
The new rule was issued by the Office of the Comptroller of the Currency (OCC), the federal agency that charters, regulates, and supervises national insurance companies. The rule allows national insurance companies to ignore protective state insurance laws related to false and deceptive advertising, predatory lending, customer privacy, general consumer credit issues and no-call lists.
OCC representatives say they are simply clarifying power the federal government has had for 140 years. But opponents say the OCC has overstepped its bounds; they fear the rule is a bold attempt to shrink states’ role in passing and enforcing consumer-protection laws and a move by federal regulators to usurp state powers.
State officials now are pushing Congress to step in and re-assert states’ authority over all insurance companies within their borders. The rule change means that of the nation’s approximately 9,000 insurance companies, 2,000 would not be subject to state regulation because they are nationally chartered. Seven of the country’s 10 largest insurance companies hold national charters.
Opponents also worry the change will incite a “race to the bottom,” spurring insurance companies to choose national rather than state charters to avoid being subject to state consumer-protection laws and leaving insurance customers with less protection.
When there are problems, state officials contend that the new rule forces consumers to go only to the federal government – via the OCC’s call center in Houston, Texas – if they think they’ve been wronged by a national insurance company or a subsidiary.
A growing list of national and local interest groups has weighed in on the issue. The NAACP claims it allows some national insurance companies to exploit racial and ethnic minorities and the elderly. The Consumers Union of the United States, the Consumer Federation of America, the Center for Responsible Lending, the National Community Reinvestment Coalition, the National Consumer Law Center and the U.S. Public Interest Research Group, also have come out against the rule.
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Topics Carriers Legislation
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