PIA Challenges FIO Assertion That Insurance Should Be Regulated Like Banks, Securities

March 24, 2014

PIA Responds to FIO Director’s Speech Advocating Federal Involvement

The National Association of Professional Insurance Agents (PIA) takes issue with an assertion made by Michael McRaith, the director of the Federal Insurance Office (FIO), in a recent speech.

In remarks to the Networks Financial Institute’s Insurance Public Policy Summit on March 12, as reported by Best’s News Service, McRaith said this: “We need to get past the notion that the insurance sector in the United States should be treated separately than any other sector because of this historic debate going back to 1904.”

“When Mr. McRaith says the insurance sector should be treated the same as the banking and securities sectors, he is dead wrong, and in conflict with current federal laws, among them the McCarran-Ferguson Act and the Gramm-Leach-Bliley Act (GLBA),” said PIA Senior Vice President Patricia A. Borowski. “The fact that insurance is regulated by our state-based regulatory system is why our sector – and the policyholders it serves – emerged almost completely unscathed from the financial crisis of 2007-2009, in marked contrast to the federally-regulated sectors.”

PIA is disappointed that the FIO, in its recent report to Congress, did not take into account the report issued by the Government Accountability Office (GAO) on June 27, 2013, that found that multiple regulatory actions and other factors helped mitigate the negative effects of the financial crisis on the insurance industry and its policyholders and that state regulators were especially critical in maintaining general stability in the market during the crisis.

“Rather than needing to ‘get past’ opposition to treating the insurance sector separately, advocates of greater federal involvement need to get over the idea that insurance can be regulated the same way the banking and securities sectors are by the federal government,” said PIA National Executive Vice President & CEO Mike Becker. “Insurance is different. Congress recognized this by mandating that the FIO serve a narrowly defined role that does not include insurance regulation, a fact that Mr. McRaith has noted repeatedly in previous congressional testimony.”

“The Dodd-Frank law assigns to the FIO a series of responsibilities involving monitoring that are all advisory in nature,” Becker said. “We agree with Congress’ decision in this regard that our state-based insurance regulatory system is best suited to regulate the business of insurance.”

“Federal law has already defined its relationship with the state-based business of insurance,” Borowski said. “The disagreement is whether we will continue the productive federal-state relationship in insurance as it is currently defined or go the way suggested by Mr. McRaith of a federally-directed industry.”

“One should never forget that all insured risks will always be local,” Borowski added. “The United States has an effective and efficient state-based insurance regulatory system that protects policyholders and offers them a broad array of competitive choices from many insurance carriers. Needed modernization is accomplished through state-based organizations like the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL). Our system protects both the American economy and the global economy. To those who want a different system, we simply say they are woefully misguided.”

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street AmericaSM. PIA’s web address is www.pianet.com.