Feds Step Up Insurance Industry Oversight

In the wake of the economic free-fall we have experienced over the last two years the government has stepped up its efforts to regulate economic activity in as many sectors as possible. The insurance industry is no exception. While the battle for healthcare reform is front and center in the public’s view now, Congress has another change coming for the insurance industry that is not making headlines. Congress has plans to create a new federal office within the Treasury Department tasked with extensive insurance industry oversight.

While many industry executives and state regulators are complaining that increased regulation will lead to more complication and administration time for carriers and encroachment on state regulatory laws, the office may bring some benefits for the industry as well. The office will give insurers its own representative in global trade talks, which is important for an industry that is increasingly expanding overseas. The office may also prove to consolidate some industry data which may prove useful for insurers.

These possibilities not-withstanding the new office, as the new federal torch-bearer for insurance regulation, is bound to be the center of contention when Democrats begin their push for federal insurer charters next year. Insurance regulation has long been the territory of the states and most state regulation bodies are unhappy with the idea of the federal government encroaching on their right to regulate insurers within their borders. State regulators argue that recent predicaments like the one AIG found itself in back in 2008 are perfect examples of why regulation should be left up to the state. Michael T. McRaith, director of the Illinois Department of Insurance, pointed out that AIG paid all of its policyholders even during its lowest point.

Source

http://www.kiplinger.com/printstory.php?pid=18958