WASHINGTON, April 21, 2008 — The National Association of Professional Insurance Agents (PIA) is opposed to the Insurance Information Act (H.R. 5840), which was introduced on April 16 by Congressman Paul Kanjorski (D-PA), the Chairman of the House Financial Services Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee.
“This bill is yet another piece of legislation that is designed to advance federal regulation of insurance, which PIA adamantly opposes,” said PIA Executive Vice President & CEO Len Brevik. “Far from being benign as its title suggests, the Office of Insurance Information would have broad authority to preempt state laws and set national insurance policy. It is, in fact, a federal insurance regulatory agency. Calling it an ‘information office’ is a misnomer.” Brevik added the bill sets up a dual system of regulation that is not optional.
A provision in H.R. 5840 states: “Any law or regulation of any state is preempted to the extent that such law or regulation is inconsistent with Federal policy on international insurance matters set forth in an agreement entered into by the United States or on its behalf by a designated representative (including the Secretary of the Treasury and the US Trade Representative) with a foreign government or regulatory entity.”
Brevik said, “This provision in the bill could not only lead to insurance regulation by decree on the part of the Secretary of the Treasury, but it also would allow foreign governments throughout the world to preempt the laws of any state in the United States, simply by getting the Secretary of the Treasury to agree. This is outrageous.”
Another provision in the bill provides for the Secretary of the Treasury to appoint a Deputy Assistant Secretary of the Treasury to head the OII, and that this individual “is authorized to determine whether inconsistencies…exist and, in the case of any such determination, shall notify the appropriate State of such determination.” It adds that a state can appeal a determination, but only to the Secretary of the Treasury, and that “No state may enforce any insurance law or regulation that has been preempted pursuant to this subsection.”
Brevik said, “This provision gives one bureaucrat in the Treasury unlimited, unchecked power to declare any state law null and void based only upon his determination that it is inconsistent with policies that the Treasury itself sets, within the broad context of international agreements. Further, it limits any objections by States to such determinations on the part of the Deputy Assistant Secretary, to an appeal to his boss, the Treasury Secretary.”
“What we see here is a preview of how the Treasury thinks insurance should be regulated: at the federal level, by decree of the Treasury Secretary who can nullify state laws at will, with no right to appeal other than to the Treasury Secretary,” Brevik said. “This bill sets up a modern-day insurance czar with an unlimited scope of authority that cannot be effectively challenged. It is reminiscent of the kind of regulation seen in the former Soviet Union.”
While under H.R. 5840, this authority is limited to international agreements, sponsors of the bill have already made it clear that this is a “first step.”
Brevik noted that the two House sponsors of optional federal charter legislation are also original sponsors of H.R. 5840, Reps. Ed Royce (R-Calif.) and Melissa Bean (D-Ill.). Both lawmakers cheered the introduction of H.R. 5840 during a recent insurance hearing before the subcommittee, with Rep. Royce saying it “would move us one step closer to an optional federal charter.” The proposal was welcomed by Assistant Treasury Secretary David Nason, who testified before the panel about the Bush administration's recently released financial services blueprint.
“The Office of Insurance Information concept is being used by OFC advocates as a vehicle to enable creation of the initial federal insurance regulatory infrastructure that, once it is established, can be rapidly transformed into the office of a federal insurance regulator,” noted Brevik. “Therefore, PIA is opposed to H.R. 5840.”
“Rep. Kanjorski has been a long-time supporter for state oversight of insurance and understands the critical position that U.S. domestic insurance needs to play in Congressional considerations,” said PIA National Senior Vice President Patricia A. Borowski. “In light of that, PIA was shocked by his introduction of this bill, the content of which is a non-starter.”
“Instead, the Chairman should build upon the interest he expressed during his April 16 hearing in using the Interstate Compact Commission concept as a workable starting point that seemed to him like an idea upon which reformers can build,” Borowski said. “Picking up on that idea will get him back on track.”
Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America (SM). PIA’s web address is www.pianet.com.