National Association of Insurance Commissioners (NAIC) President and Kansas Insurance Commissioner Sandy Praeger issued a statement in regard to the U.S. Treasury Department’s Blueprint for Financial Regulatory Reform:

“State regulators are glad that someone at the federal level is finally paying attention to the financial crisis facing our nation,” said Praeger. “In our comments to the Treasury as this report was being developed, we noted that better coordination and communication among federal and state regulators is essential to effective oversight of the financial services sector. However, any change should not put the needs and convenience of Wall Street ahead of the cares and concerns of Main Street.”

“Clearly, the current climate of less regulation and less accountability has led to the turmoil affecting broad sectors of our nation’s economy. We agree that federal action to look at system risk is long overdue. We agree that the federal government needs to remodel their financial regulatory house, but they need to leave the insurance ‘room’ alone!”

A Solution In Search of a Problem

“While we certainly support better coordinating and modernizing of their oversight efforts, ‘Modern’ does not mean ‘Federal,’ Praeger said. “State insurance regulators are marginalized in this report and, frankly, for our sector it looks more like a solution in search of a problem.”

“State insurance regulators are accused of inefficiencies in oversight, but we need look no farther than Hurricane Katrina to see how well federal solutions serve the nation,” she added. “State regulators challenge the proponents of a federal solution to trace the origins of the current problems in the housing and bond insurance markets … and they will find that the true failures lie with a lack of coordinated federal oversight.”

The NAIC also put out a strong statement responding to what it said were exaggerations and inaccuracies in recent statements attributed to Marc Racicot, president of the American Insurance Association (AIA). AIA is a strong backer of Optional Federal Charters.

“High-paid insurance lobbyists consistently criticize and attempt to undermine state insurance regulators for what they consider to be slow filing processes,” said Praeger. “It is ironic that as they complain about process delays, consumers tell us that some insurance companies are slow to pay claims. In fact, 60 percent of consumer complaints reported to the NAIC by states are the result of claims handling problems caused by insurance companies. A large majority of them due to slow claims payment processes or outright denials.”

“It is time for the industry to address speed-of-payment to consumers,” Praeger said, adding that sometimes, speed-to-market of insurance products is not a good thing for consumers. “When insurers carefully review their requirements and submit good applications, the approval process is very fast. When companies fail to comply with state laws or offer questionable products, it takes time to review and correct their work to make sure that products deliver the benefits promised to consumers.”

‘Talk to Your Congressman’

The NAIC President also characterized the Treasury’s blueprint as needlessly complex.

“This voluminous plan only seems to offer more preemption of state oversight, not less,” Praeger said. “Not only does the plan not address the roots of the problem, but the proposed ‘solution’ is needlessly complex. While we welcome a review of the federal failures, we strongly caution against federal intervention in a state-based system that is working for consumers and industry alike.”

Meanwhile, Iowa Insurance Commissioner Susan Voss said she would be contacting every member of her legislature for feedback. Voss said she has sent a letter to all 150 Iowa state legislators about the report. Voss remarked that in the report, “nobody is talking about the consumer,” and she wondered whether members of the public who had an insurance problem in their state would want to call a toll-free number located in Washington, D.C.

She said state legislators should know that if the Treasury plan went into effect, in many cases, when a consumer calls their office seeking assistance on an insurance matter, they will have to respond, “Talk to your congressman.”

NAIC Response to Treasury Report (NAIC 3/31/08)

This article originally appeared in the April 2008 issue of PIA Connection.