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FIO Bill, As Currently Drafted, Is An Unmitigated Disaster for Main Street

A scheduled mark-up of the Federal Insurance Office Act of 2009 (H.R. 2609), keeps getting postponed - and that's a very good thing....
November 11, 2009

A scheduled mark-up of the Federal Insurance Office Act of 2009 (H.R. 2609), keeps getting postponed - and that's a very good thing. The bill would create a federal insurance office within the Treasury Department.

As of this writing, the bill as drafted is an unmitigated disaster for Main Street insurance companies and agents. It has been transformed from its earlier incarnation as the Office of Insurance Information Act, which would have created an office with a limited scope and mandate, into something very different.

The current proposed language directs the office to require information reporting to 'monitor all aspects of the insurance industry' - an incredibly broad directive duplicating what the states already do effectively. In addition, the mandate says the office is to 'perform such other related duties and authorities as may be assigned to the Secretary [of the Treasury].' And while FIO supporters say the bill does not set up a new federal regulatory agency, the office would have subpoena power.

The FIO legislation places inadequate limitations on the Treasury Secretary's authority to preempt state insurance laws. States are notified only after such a preemption determination has been reached. There is no process or provision for states to provide input to the process in advance, or to appeal or otherwise challenge such preemptions. Apparently, the notification period following a preemption determination is solely intended to enable states to "comply."

PIA along with the NAIC and the National Conference of Insurance Legislators (NCOIL) have been working feverishly. PIA issued a press release pointing out that the lack of limits on preemptions in the bill was in marked contrast to a bill passed by the committee the previous week, which imposed strict limits on preemptions of state insurance laws by federal agencies such as the Office of the Comptroller of the Currency (OCC).  NCOIL issued a strong press release and letter. The NAIC suggested changes to H.R. 2609 to narrow the scope of the office and put limits on preemptions. The Property Casualty Insurers of America (PCI) has joined the battle (see next item).

The mark-up (i.e. the committee's final review) of H.R. 2609 had been scheduled to begin on October 27. It was abruptly postponed after the NAIC, NCOIL and PIA went public with our objections. There was talk on Capitol Hill that the mark-up could happen this week. Now, the week of November 16 is being mentioned. We are being told that an attempt is underway to "grease the skids" for H.R. 2609 by working on changes behind closed doors, with all of the marking up essentially being done in private. Legislators who previously objected to the OII are being asked what they want.

What It Means to Agents:  For years, PIA has been saying that the effort to create an insurance office in the Treasury Department is a slippery slope that could lead to a federal takeover of all insurance regulation. The transformation of OII into FIO proves that our suspicions were correct. But it's not too late to stop this process. The NAIC's proposed fixes to this fatally flawed draft need to be adopted. If major corrective surgery fails, H.R. 2609 needs to be killed.

PIA Advocates Consistency on Preemptions in H.R. 2609 (PIA 10/26/09)

More Details On Federal Insurance Office Legislation (National Underwriter 10/27)