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P/C Insurers Voice Concern About Rivals' Use of Federal Aid

Property-casualty insurers are asking legislators to rein in rival financial companies that could use federal aid for boosting their competitive advantage. The Treasury Department's $700...
December 9, 2008

Property-casualty insurers are asking legislators to rein in rival financial companies that could use federal aid for boosting their competitive advantage. The Treasury Department's $700 billion financial industry bailout package may present "a substantial risk of market distortion," Marc Racicot, president of the Washington-based American Insurance Association, said in a letter to House Financial Services Chairman Barney Frank and other lawmakers.

U.S. funds may be used for "unintended purposes, such as gaining market share," Racicot said, adding that Congress should prevent companies receiving help from federal aid programs from competing unfairly with companies that are not taking the money. A number of insurers have confirmed publicly that they have applied to participate in the CPP and other programs. It is believed that other insurers may have applied for the programs without disclosing their applications.

What It Means to Agents:  PIA believes Congress never intended for the rescue bill to be used to reduce competition in the marketplace. Federal officials should not be permitted to use this law as leverage to bring about wholesale changes in the manner in which the entire financial services sector operates. To do so would be to allow the current or a future Treasury Secretary to unilaterally impose his pre-conceived view of how the entire financial system should operate, based on nothing more than his individual opinions and personal preferences, which would not be subject to public debate or a determination by Congress.