When H.R. 5840, the innocuous-sounding Insurance Information Act of 2008, was introduced earlier this year, its supporters said it was simply an effort to create an information resource for members of Congress on insurance matters.

As the drafting process for H.R. 5840 proceeded, the Treasury Secretary’s powers were expanded, giving him authority to preempt state insurance laws, regulations and practices, not only when he says they conflict with international agreements as was originally drafted, but also when he says they conflict with “national insurance policy” as set by the Treasury Department.

By the time that the House Capital Markets Subcommittee approved H.R. 5840 on July 9, 2008, the bill had been transformed into legislation that would enable a federal takeover of most insurance regulation.

H.R. 5840 is no longer a bill that is only about creating an insurance information office. The current version of this bill would effectively lay open to review and approval by the Secretary of the Treasury the laws and practices of all 55 United States jurisdictions in most matters relating to insurance.

People have been encouraged to read the bill more narrowly than this. If that is the case, then PIA wants the actual language in the bill to articulate that narrowness. The current language provides the Treasury Secretary the power to determine which state laws, regulations and industry practices will be preempted. Period. This is a federal power grab.

When Congress reconvenes in September, supporters of H.R. 5840 are determined to push the bill through the House with little debate. It appears that supporters in the Senate will attempt the same with their version of the legislation.

Which makes one wonder: Why is there so much pressure to move such ground shifting legislation through Congress with so little discussion? While other segments of the financial services marketplace, which are already regulated by the federal government, have experienced turmoil that has roiled world financial markets and harmed America’s economy, the insurance industry has been stable under its longtime system of state regulation.

The bottom line, state regulation works. More then 12,000 professionals in state insurance departments are on the job everyday to enforce consumer protections and keep a watchful eye on insurer solvency to assure a company’s ability to pay claims. Their track record of success is strong. Can the same be said for a future, unknown federal insurance regulatory regime?

State regulators and legislators continue to analyze their systems of insurance regulation and make improvements. America owes it to its insurance consumers, members of the insurance industry and its future economic prosperity to continue to make improvements to insurance regulation within the current system of state regulation, rather than rolling the dice on a federal regulator with a poor track record.

This entry was posted on Wednesday, August 13th, 2008 at 2:56 pm and is filed under Uncategorized .