by: Bob Graham
published: Oct 14, 2008
If the federal government is going to take over insurance regulation, it has to happen in the next year, says a former insurance commissioner from New York.
''If we don’t address the problems now, with all that’s going on,'' said Howard D. Mills III, a former New York insurance commissioner who now is chief advisor of the insurance industry group at Deloitte & Touche USA, ''when will we do it?''
Howard D. Mills III, who served as New York's superintendent of insurance from 2005 to 2007, said federal regulation of insurance, as described in U.S. Treasury Secretary Henry Paulson's blueprint for reform, released in April, is more heavily supported now than ever. Because it is wrapped in with the regulatory reform of banking and financial service companies, it's passage is likely in the next Congress.
If approved, he said insurance regulatory reform would help in areas where state-based regulation cannot: speed to market for new insurance products and the globalization of insurance.
Where a state-based system has performed ''as well as expected'' is in consumer protection and solvency, the latter best demonstrated because American International Group's insurance operations were not at issue in its recent federal bailout, Mills said.
''Still, there are inadequacies within the state-based system because the 50 state insurance commissioners are not unified,'' he said. Mills said part of the problem is that state insurance commissioners average about 18 months on the job; each change delays the process of unifying state regulations. Also, each state commissioner is beholden to his state elected officials and its consumers, making the likelihood of passage of uniform regulations small. So far 31 states have joined the National Association of Insurance Commissioners' product registration compact, which requires passage of similar laws for product registration
The Office of Insurance Information, one of the proposals of Paulson and Congress, is garnering support in parts of the industry. The office would provide information to Congress on insurance activity.
Another measure, the creation of the optional federal charter, continues to draw wide support from many in the life insurance industry, but not as much from the property/casualty arena.
Mills said the power of the Independent Insurance Agents & Brokers of America, an organization representing independent agents, cannot be overlooked in the debate.
''The Big I has a powerful presence in every state capital,'' said Mills, who served in the New York State Assembly from 1998 to 2004. ''You know the power of the Big I and independent agents. It's a very powerful lobby.''
The Big I wants to ''protect the status quo,'' and so the group's support of reform efforts is not likely, Mills said.
