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AIA Takes Swipe at State Insurance Regulation in FIO Filing

The American Insurance Association (AIA) says state regulation of insurance is “inefficient and costly.” The comments come in an answer to the Federal Insurance Office’s request for industry input on a forthcoming and much-delayed study on insurance regulation
September 4, 2012

The American Insurance Association (AIA) says state regulation of insurance is “inefficient and costly.” The comments come in an answer to the Federal Insurance Office’s request for industry input on a forthcoming and much-delayed study on insurance regulation. The AIA letter lauds the states for not imposing pricing and other contractual terms and conditions on the U.S. insurance market, other than certain minimum standards such as a required transfer of risk and standard insolvency clause. But despite this, it turns around and resumes complaining about state regulation being a “patchwork of standards.”

If it seems like you’ve heard this song before, it’s because we all have. Countless times.

PIA has always been and remains a staunch supporter of our nation’s state-based system of insurance regulation. That system, contrary to the rhetoric advanced by vested interests, is very efficient. But it produces a level playing field for carriers and producers of all sizes, which apparently some of the “big boys” don’t like. Federal regulation, on the other hand, would tilt that playing field to banks and securities firms along with a handful of financially interconnected international carriers. It would also tilt that playing field away from small and midsize carriers, and the independent insurance agents who represent them. It would also disadvantage consumers, who would have fewer choices in a decidedly less competitive insurance marketplace. All in the name of the “big boys” wanting less competition, so they can make even more money.

State insurance regulation has made the insurance industry one of the most profitable sectors of our nation’s economy for well over 100 years. Conservative, prudent state regulation protected our industry and our policyholders during the 2008 financial crisis, while banks and securities firms that were irresponsibly supervised by the federal government sustained massive losses.

PIA believes in competition – the robust kind of competition that benefits our industry, our customers and the broad-based American economy. This is the competition that our state-based system of insurance regulation protects. And it is very efficient, indeed.