Tensions flare over insurance regulation

The insurance industry has been regulated under states' sovereignty for more than a hundred years. Although many people still acknowledge that it is best for states to hold the control over the insurance industry, others think it is time for the federal government to intervene in the industry. \nCurrently states have control over insurance policies and regulations. But individualized state insurance policy and regulation cause duplication, delay and inconsistent and conflicting requirements. Especially if an insurer wants to sell its product across the nation, hassles and costs to satisfy unique regulations of each state cause delay and expense that would ultimately disadvantage its customers and policyholders. \nNon-uniform regulations and multiple enforcement requirements among states cause inefficiency and duplicate regulation. Many experts and professionals agree that renovation in the insurance regulation is eminent. \n"No matter what side one takes in this long-standing debate, it has become clear to me that this is no longer a question of whether we should reform insurance regulation in the United States," said Paul Kanjorski, ranking Democratic member, during the "Third Hearing on Insurance Regulation and Competition for the Twenty-First Century" on June 18. \nDuring the last three meetings at the House Committee on Financial Services, it became clear that the current issues over the insurance industry are not merely about technical improvement in regulations. It involves redefinition for determining the balance between the federal government and states. Hence, the meetings over the insurance regulation included intense debate over who -- states or the federal government -- ought to have a controlling authority over the insurance industry. \nCertain sections of the insurance companies who are hurt by the current state regulations are anticipating optional federal charter. That way, they can choose to follow a unified regulation throughout the nation, which is controlled by one authority, federal government. \n"One goal (of the optional federal charter) is uniformity, consistency and efficiency of regulation and supervision. A federal charter would provide insurers and producers with 'one stop' regulation and supervision, rather than the patchwork of regulation and supervision by multiple jurisdiction as is the case today (of the state charter)," according to the Financial Services Coordinating Council's statement for the House Committee. \nThe optional federal charter gives freedom for an insurance company to choose from whom, the federal or state, to get license permission and be regulated from. \nBut several insurance trade groups and state insurance regulators are opposed to the idea of optional federal charter and try to justify the current multi-state regulations and systems. Their argument is that the multi-state regulation is still sound but just needs some improvement. \n"I came here today to speak in defense of the proposition that a reformed system of state insurance regulation is superior to an unproven system of federal regulation," said Wayne F. White during the testimony for the House Committee on behalf of The National Association of Mutual Insurance Companies. \nFurthermore, they doubt the integrity and credibility of the federal government, arguing that the federal government would eventually take over the control with its almighty power. Their concern is that the federal government's control would start as an optional choice but it can over take states' sovereignty gradually. \n"Let me ask you a question. Did you ever see the federal government stay optional? As soon as they step a foot in the door, they will take over. It is very natural for the federal bureaucracy to do so," said Russ Hamilton, senior administrator of First Investors Corporation's Indianapolis regional office, which offers various life insurance products.\nHistorically, the federal government's initial intervention in the name of "optional" or "support" grows to be a binding force that hardly stays optional down the road. \n"Speed limit regulation is a good example. The federal government would force speed limit to 55 miles when the state wants it to be 70. If the state doesn't pass the law with 55 miles, then the (federal government) will stop supporting financially for the future road construction or repair," said Eric Rasmusen, professor of Business Economics and Public Policy at IU. "You can obviously see the trend in the primary and secondary education, too. Federal regulation is increasing. \n"If the state doesn't like the federal government, then the federal government will cut the financial support"