Would those of you longing for federal regulation of insurance be quite so enthusiastic about having Uncle Sam overseeing your business if the National Insurance Czar ended up being Eliot Spitzer, the person whose relentless probes turned the industry upside down?
Sound far-fetched? Perhaps, but only because New York’s crusading attorney general is probably going to be too busy running his home state as governor to take the job.
However, luckily for Democrats, there are plenty of other candidates out there for the new regulatory post who are just as hostile to the industry, such as two-time nemesis John Garamendi, insurance commissioner of California, or longtime gadfly J. Robert Hunter of the Consumer Federation of America.
Yes, I said Democrats. With Republicans running scared about losing control of Congress this November, and the approval rating of President George W. Bush at 33 percent, it's conceivable that a Democrat would be the one choosing the first federal insurance regulator, if Washington ever gets its act together and finally decides to take a direct role in overseeing insurance.
You get my point. Concentrating power with one federal regulator would free carriers and brokers from pesky state regulations, but it might also leave them at the mercy of one really tough pooh-bah.
So, what do you think about that? Post on my blog and let me know!
Comments (4)
Gee, Sam, until I saw the list of candidates for czar, I thought I opposed federal control. Now I gotta think more seriously about this question...
Bob Hunter
Director Of Insurance
Consumer Federation of America
Posted by Bob Hunter | September 3, 2006 8:03 AM
Posted on September 3, 2006 08:03
Bob Hunter, you are officially my first blog respondent!!!
Actually, Bob, I didn't mean to indicate that you are in favor of federal regulation personally, and apologize if anyone was misled by my posting. What I meant to suggest is that should Congress adopt optional federal charters, and a Democrat is elected president, you would be among the natural choices for the post of Federal Insurance Czar.
If you'd like, please feel free to outline exactly how you feel about optional federal charters.
Sf
Posted by Sam Friedman | September 5, 2006 8:38 AM
Posted on September 5, 2006 08:38
This subject is a great way to start out your blog. There are lots of divergent opinions that should make interesting reading.
Yes, clearly your choices for czar are enough to scare the industry, but I think it is important to look at the main reasons for regulation. I believe these are solvency and consumer protections. It is the latter of these that is in serious jeopardy when you have a bifurcated regulatory system. Do we really believe you can have a fair regulatory climate with two different paths for regulation? Will small consumers really be served by this bifurcated regulatory system? I think not.
Posted by Tommy Dietz | September 5, 2006 9:44 AM
Posted on September 5, 2006 09:44
Dear Sam:
Best of luck with the blog. You will hear from me a lot.
You talk about Federal Regulation as if it were a bad thing. As I pointed out in an FC&S On Lines Column a few years ago, the insurance industry enjoys (takes advantage of) a unique position (shared only by professional baseball)--absence of Federal oversight. As I pointed out, that lack of Federal oversight has led to decades of consumer abuse.
As the TV watchers screamed in the movie "Network" "I'm as mad as hell and I'm not going to take it any more." One evidence of consumer displeasure and mistrust is the huge increase in the use of public adjusters on property claims.
Florida is a particularly bad situation for consumers. Insurance companies underpay claims on a consistent basis - and I'm talking 300% and 400% and 500% underpayments.
When insurers are not underpaying, they are imposing crippling rate hikes on their customers. The church that I attend in Ft. Lauderdale paid $5,000 for its P&C package in 2005-06. The premium for 2006-07 is almost $16,000. And the church is located 10 miles inland from the ocean.
Finally, when insurers are not underpaying claims or overcharging on premiums, they are thinning out their customer base, through indiscriminate non-renewals; thus forcing property owners into the "insurer last resort" - such as Citizens down in Florida.
Michael K. McCracken, CPCU
Posted by Michael K. McCracken, CPCU | September 5, 2006 4:14 PM
Posted on September 5, 2006 16:14