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House Approves Federal Insurance Office Proposal

On December 10, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173). Included in it is...
December 15, 2009

On December 10, the U.S. House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173). Included in it is the Federal Insurance Office Act (FIO) of 2009 (H.R. 2609). The legislation was approved on a vote of 223-202.

In addition to establishing the FIO, H.R. 4173 would create a separate Consumer Financial Protection Agency (CFPA) to address consumer protection issues with financial products, but it specifically excludes property/casualty insurance from the jurisdiction of the new agency.

The establishment of a federal office of insurance now awaits only a U.S. Senate debate. The insurance office language in the existing Senate bill, which was authored by Sen. Chris Dodd (D-Conn.), grants the agency more authority than this House version. Dodd's version, unlike the one passed in the House, allows the proposed CFPA some limited oversight of insurance products.

What It Means to Agents:  Although the changes to the FIO which were negotiated by the National Association of Insurance Commissioners (NAIC) would prevent the office from replacing state regulation of insurance - for now, at least - the machinations surrounding this bill prove that the FIO will be the focal point in the battle of state vs. federal regulation going forward.

Advocates of federal regulation have been working hard to pull the FIO bill in a direction that would bring about federal regulation as quickly as possible. In contrast, PIA along with the NAIC, the National Conference of Insurance Legislators (NCOIL), the National Conference of State Legislatures (NCSL), the National Association of Mutual Insurance Companies (NAMIC) and the Property Casualty Insurers Association of America (PCI) have all been working hard to preserve state regulation in this bill.

We have continued to report how each time safeguards are placed in this bill to ensure that the FIO is only an information office, the safeguards then disappear and we have to get them put back in again. At the moment, the safeguards are back in - for now, at least - but the bill still has to go to the Senate, then likely to a House-Senate conference. Since we already know that advocates of federal insurance regulation are trying to make the FIO into a regulatory office, we assume that they will continue to try to gut the protections for state regulation in the Senate and in conference.