Although insurance remains (for the moment) a state-regulated business, the spotlight has clearly shifted to Washington this year, where the industry faces a number of critical battles–to defend its limited antitrust exemption, extend the federal terrorism reinsurance backstop, and, last but not least, determine once and for all who will regulate insurers and producers. But despite the many high-profile hearings staged by Congress these past two weeks to examine insurance issues, perhaps the most attention should be paid to a candid speech delivered at a private gathering last week by Rep. Barney Frank, D-Mass., who chairs the powerful House Financial Services Committee.
As reported by our own Matt Brady, Rep. Frank–aptly named, because he's always been a straight shooter–warned that backers of federal regulation would be wise to start considering the price they'd be willing to pay for Uncle Sam's involvement in terms of greater consumer protections.
Think about what conditions you would accept with it, because there will be some, warned Rep. Frank, during a speech before the Networks Financial Institutes Annual Insurance Reform Summit.
There is a reason why you do consumer protections. Because if you dont, people wont vote for you, but if you do, they will, was the simple political calculus he laid out.
What might that mean in practical terms? Well, he said, it might mean that insurers offering a particular line in one state might also be required to offer additional lines they offer elsewhere–meaning if you want to write auto coverage in Florida or Mississippi, or commercial insurance, you might be forced to write homeowners as well.
He also mentioned the possibility of mandating “all perils coverage for property insurance, including flood exposure.
However, on the positive side for carriers, Rep. Frank conceded that federal consumer protections would not necessarily be as tough as those in the most demanding state. Indeed, he hinted that in any federal oversight scheme, the country's overall good might win out over any particular state's concerns.
Along those lines, he acknowledged that under a federal regulatory program, residents of one or two states could conceivably lose some protections if it means improving consumer protection in the majority of states.
So, what about Rep. Frank's question? What compromises would you backers of federal regulation be willing to concede to get Uncle Sam to finally take the plunge? Where would you draw the line?
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