Regulation: Insurance agents demand removal from proposed regulatory reform

The PIA says that "as currently written, the Restoring American Financial Stability Act of 2010 ( Bill no. S. 3217) creates an Office of National Insurance (ONI) within the Treasury Department that is overly broad in scope and that undermines state-based insurance regulation, which has proven effective in largely insulating the insurance industry from the recent financial crisis."

But the PIA is not seeking exclusion from regulation: rather that - as many are saying - Federal supervision is not the only, nor even the best answer. The PIA says that the states know best - and already apply more stringent regulation than the Bill proposes.

"This is a federal government solution that - like many federal solutions - is being proposed for a problem that does not exist," said PIA National Executive Vice President & CEO Leonard C. Brevik. "This federal insurance office is too expansive, too expensive and counterproductive."

Brevik added that inclusion of the ONI language renders S. 3217 inconsistent. While it purports to attempt to fix the many flaws in federal regulation of the banking and securities sectors, it creates a path to remove insurance from more stringent regulation by the states.

As currently drafted, the PIA says, S. 3217 grants the ONI the power to recommend which insurers should be supervised by the Federal Reserve and to preempt state laws that it finds inconsistent with international agreements. It permits the Treasury Secretary to assign the office additional, unspecified duties. And it directs this new office to evaluate and recommend to Congress the best ways to modernise the insurance system.

"The legislative language creating this office is written from the perspective that the federal government always knows best," Brevik said. "PIA believes that when it comes to insurance, the federal government does not know best, the states do. Deficient federal regulation of banking and securities led to the financial crisis - while effective regulation of insurance by the states was successful."

"This bill sets up the infrastructure for a federal takeover of state-based insurance regulation," Brevik said. "PIA supports state regulation of insurance and joins with the National Conference of Insurance Legislators in opposition to creating an Office of National Insurance."