Reforming Insurance Regulation
Currently insurance companies are regulated by each individual state. Congress has been for years discussing legislation to reform the current regulatory system. The MacCarran-Ferguson Act passed in 1945 exempted insurance companies from federal anti-trust laws and gave states the power to regulate the business of insurance.
There are three basic sides in this battle over reform, state regulatory commissions, insurance companies plus their agents and consumer advocacy groups.
State Regulatory Commissions
For many years states have been fighting any attempts to give the federal government oversight over insurance companies. They feel strongly against that preempting state laws would be a big mistake and that adding an extra layer of bureaucracy would make the entire system unwieldy and unresponsive to consumer needs.
Insurance Companies
This is a complicated issue for them. On the one hand, being subject to federal anti-trust laws has to be a main concern but on the other, having a uniform regulatory code that doesn’t vary from state to state would be very beneficial to them.
Consumer Advocacy Groups
Many of these groups have sharply criticized the insurance industry over it’s handling of the Hurricane Katrina disaster. At issue are the claim’s paying practices of mainly property and casualty insurers as well as pricing practices. It has been this sort of public outcry that has prompted Congress to review insurance regulation reform.
There is a lack of trust on all sides of the issue. States don’t trust the federal government and feel sweeping reform isn’t necessary. The insurance industry feels that some states over reach with their regulatory powers and hurt business. Consumer activists meanwhile mistrusts the powerful lobbying efforts of the industry in seeking reforms favorable to them.
It will be interesting to see how the battle plays out and it is quite possible none of the sides will get what they want.
