The deep division within the industry on the issue of federal insurance regulation continues. Last week, the Senate Banking Committee held a hearing on the broad topic. The hearing was not focused on specific pieces of proposed legislation.

Some of the witnesses were staunch supporters of state regulation, opposing federal encroachment. Others advocated for an optional federal charter. Steven Goldman, commissioner of banking and insurance in New Jersey, testified on behalf of the National Association of Insurance Commissioners (NAIC), telling the Senate Banking Committee that “the current U.S. insurance regulatory scheme is strong, and our track record is regarded internationally as the benchmark by which other supervisory systems are measured.”

“In addition to successfully protecting consumers, state insurance officials have proven to be adept stewards of a vibrant, competitive insurance marketplace,” Goldman said. He added that the U.S. insurance industry has “grown exponentially in recent decades in terms of the amount and variety of insurance products and the number of insurers,” noting that the industry now has combined annual premiums exceeding $1.4 trillion, and that its share of the U.S. economy has grown from 7.4 percent of gross domestic product in 1960 to 11.9 percent in 2000.

“Clearly, this is not an industry that has suffered under state insurance supervision,” he said.
 
Travis Plunkett, legislative director of the Consumer Federation of America, said consumers are “agnostic” on the question of whether regulation should be at the state or federal level. However, he added, “we are not willing to accept a new regulatory structure that allows insurers to pit state and federal regulators against each other to further drive down standards, or a system that guts consumer protections in the states and establishes one uniform but weak set of national standards.”

August 5, 2008