During a hearing before the House Financial Service Committee’s Capital Markets Subcommittee on Wednesday, Chairman Paul Kanjorski, D-Pa., said he’d introduce a bill to create an interim federal insurance oversight agency –the Office of Insurance Information – within the U.S. Treasury Department. The interim office would focus on gathering information about the insurance industry and coordinating with state regulators on pressing insurance regulatory issues.
“While we’ve not had the opportunity to thoroughly review the legislation, NAMIC is concerned this proposal could be a first step in the move toward a federal regulator,” said Justin Roth, NAMIC’s senior federal affairs director. “For many small- and medium-sized insurance companies, the proposed OII could create an additional layer of bureaucracy as they will have to comply with potential reporting requirements of the new office. This smacks of the beginnings of dual regulation.”
Roth said consumers would bear the brunt. “We only have to look as far as the current system of health insurance regulation to see the confusion that is created by dual regulation,” he said. “For insurance consumers, it could also mean fewer products and higher costs.”
NAMIC has long warned that the most likely scenario of pursuing alternate federal regulatory schemes is additional regulatory burdens. This proposal seems to give credence to that warning.
During the hearing, Chairman Kanjorski said an OII would help Congress become better educated about insurance policy. He said the experiences of Sept. 11, Hurricane Katrina, and the ongoing problems in the bond insurance marketplace have highlighted that need.
“Advice and counsel on issues affecting the insurance industry are currently available, as evidenced by the involvement of federal officials in a variety of issues, including terrorism and natural catastrophe risk,” Roth said. “Creation of a new bureaucratic entity is not warranted at this time.”