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Statement by the National Association of Professional Insurance Agents (PIA) on the impending introduction of the Consumer Protection and Regulatory Modernization Act

February 13, 2009 - The National Association of Professional Insurance Agents (PIA) reiterates its opposition to federal regulation of insurance, in light of...
February 13, 2009

February 13, 2009  - The National Association of Professional Insurance Agents (PIA) reiterates its opposition to federal regulation of insurance, in light of the impending introduction of the Consumer Protection and Regulatory Modernization Act. The bill's authors, Reps. Ed Royce (R-Calif.) and Melissa Bean (D-Ill.), say it would lead to creation of a federal office of insurance regulation, according to a report in the National Underwriter.  Reps. Royce and Bean outlined some of the legislation's major aspects, saying the bill would be different from prior drafts in that it would call for a federal consumer protection office in all states and that it would incorporate all the model laws of the National Association of Insurance Commissioners. The bill is scheduled to be introduced after the President's Day recess.

PIA believes that Congress needs to concentrate first on its primary obligation: to correct the current, failed federal oversight system. Diverting Congressional attention to restructuring the business of insurance or its oversight is a distraction from fixing the problems in the financial markets that resulted from federal failures.

PIA is also concerned that this legislation could bring about the de-facto federalization of insurance regulation as it simultaneously guts the existing state-based system of insurance regulation. Consumers are already well protected by the modern, effective system of regulatory supervision by the states. In fact, the state-based system of insurance regulation has been a model for successful regulation since the inception of the current financial crisis. While federal regulation of banking, securities and capital markets failed, state insurance regulators have been successful in protecting consumers.

Congress needs to focus on repairing the systemic flaws in the failed federal system for financial services, not take action that would disrupt and undermine the successful state insurance regulatory system.

Treasury Secretary Timothy Geithner told Congress on February 10 that, in his words, "…large parts of our system remained outside of any meaningful oversight, oversight that provided a measure of restraint commensurate with the risks those institutions faced."

His observation is painfully correct as it applies to large portions of banking, securities and capital markets, over which federal regulators have authority but failed to act to provide any meaningful and effective oversight, or elected to take a pass on their oversight of private money markets, leaving them to run amok.

However, Secretary Geithner would be woefully ill-advised to conclude that the insurance industry remained outside of effective oversight because it was not federally regulated. The insurance sector was the only part of financial services that worked well and is still moving forward in meeting all of its financial obligations, as compared to the other financial sectors.  In large measure this is due to the insurance industry being subject to more rigorous regulatory supervision by the states. The stability of our industry is also due to the fact that in insurance there is regulatory clarity. Unlike at the federal level, there is certainty as to who regulates insurance, what constitutes compliance and that state insurance laws will be enforced. Because the success of the insurance industry depends upon the discipline of insuring against risk - not seeking it out - there is a greater appreciation in our industry of the importance of compliance with the kind of fiscally responsible oversight that ensures financial soundness. That has been sorely lacking in the other sectors.

PIA supports President Obama's efforts to return soundness and stability to the beleaguered sectors of our economy. As the President has stated, "If we help Main Street, ultimately we're going to help Wall Street." PIA Main Street independent insurance agencies are small-to-midsize companies serving the needs of individuals, businesses and governments in their local communities. They, like millions of Americans, need Congress and the federal government to act now to return stability and soundness to banking, securities and capital markets.

Since the federal oversight system failed so miserably in all other areas of financial services except insurance, for which it did not have responsiblity, Congress, the Administration and federal regulators need to fix that system and make sure it works, instead of dragging the insurance industry into a failed federal system or gambling its future on a new and unproven federal regulatory system.
 
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.

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