Unclear Scope For Proposed Federal Insurance Office
Many different groups are having misgivings about a new, proposed Federal Insurance Office. Regulatory reform has been expected for some time and it has been known that the government would create some sort of federal agency to keep a closer tab on the insurance industry.
The reform in it’s current iteration has broader powers being given to the new federal agency than in previous proposals. Insurers, trade associations, state regulators, and consumer interest groups are all unclear as to what the eventual outcome will be and how this new agency will interact with current state laws and how it will affect both the industry and it’s customers.
While insurers have long railed at the inefficiencies of dealing with fifty different sets of laws and regulators, they are probably uncertain whether or not if it’s in their best interest to keep the status quo. With last year’s financial panic, there have been strong head winds in Congress for a much stricter regulatory code across the entire financial system but having some sort of federal agency in charge in a period of deregulation is a far cry from what will likely be the case in these economic times.
State regulators also have their misgivings and for years have fought attempts from the federal government to encroach on their regulatory powers. Consumer groups are also worried about what this will mean for consumer protection issues.
Of course the federal government is also concerned with systemic risk factors in the industry and wouldn’t like to see a repeat of the AIG fiasco. There needs to be a better solution in place, rather than needing to throw hundreds of billions of dollars at a problem to keep the financial system from collapsing.
There doesn’t appear to be anyone particularly thrilled with the current reform proposal and we are likely to see considerable lobbying efforts from a number of different groups. There have been a number of delays already in the proposed financial reform and some officials are growing concerned that it won’t be in place by the end of the year.
