The U.S. House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises advanced H.R. 5840, the Insurance Information Act of 2008 out of committee this week.
The bill would "establish an Office of Insurance Information in the Department of the Treasury." Ostensibly, such a federal office would only serve to clarify United States insurance policy to the international community.
Critics charge, however, that the bill is veiled attempt by insurers to override state regulation of insurers and set up an "optional federal charter" (OFC). Specifically, the National Association of Insurance Commissioners President, Sandy Praeger, in a letter to the Chairman of the Committee stated:
"Every insurance commissioner strongly believes that an OFC is the worst possible public policy choice for insurance. An OFC would decimate consumer protections via arbitrage, would damage the world's most competitive insurance market and would result in a massive expansion of the federal government. The NAIC unequivocally opposes any attempts to use this bill as a vehicle for such a misguided policy."
The concern is that the system now allows states to set consumer regulations, solvency requirements, and other regulatory measures that insurers must follow in order to do business in a particular state. The concern is that insurers are attempting to ignore such regulation by seeking federal registration that would preempt state laws. Recent strong consumer actions, such as those in Florida and Mississippi, would be eliminated by preempting federal legislation.
Supporters--mostly insurers--claim such a federal system would create uniform legislation across the country and allow better competition in foreign markets.
It remains to be seen whether the bill will be passed by the House and Senate.