Consumer Federation May Endorse Federal Regulator, Drop Stat

 

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January 29, 2009 Thursday 04:22 PM EST

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Consumer Federation May Endorse Federal Regulator, Drop State Support

Sean P Carr

WASHINGTON



The Consumer Federation of America is considering withdrawing its support of state-based regulation and endorsing a federal insurance regulator, its insurance director said.

J. Robert Hunter said the organization has grown increasingly frustrated with the National Association of Insurance Commissioners, which it sees as too often giving in to the industry. The "straw on the camel's back" was a NAIC's consideration of fast-track capital and surplus relief for life insurers, he said.

"The NAIC in our view has gotten weaker and weaker over the last decade since the threat of an optional federal charter. We think that threat has caused considerable deterioration in consumer protection," said Hunter, a former Texas insurance commissioner. Hunter is also a one-time federal insurance administrator -- a position which does not currently exist.

CFA, the Center for Economic Justice and other consumer groups have clashed with NAIC leaders and state regulators as a whole. Issues of dispute have included what they see as a push toward greater deregulation in personal lines of insurance, moves to ameliorate industry opposition to market conduct examinations, a reluctance to limit the use of credit-based insurance scoring.

"When consumers say there's some urgency, they don't care. But when the insurance companies do, they do. And that bothers us," he said.

Hunter had previously said he believes some role for federal regulation is necessary, but has been leery of specific proposals to date (BestWire, April 7, 2008). The election of President Barack Obama and the late-2008 "financial meltdown" were game-changers, he said.

The CFA is considering endorsing minimal federal regulatory standards that would keep intact state regulatory systems as well a "pure" federal regulator, Hunter said. The federation will seek to produce a coordinated proposal with other consumer groups, he said.

The Obama administration intends to push a major overhaul of the regulatory apparatus governing financial services by this spring, even as a new report from the Government Accountability Office suggests Congress examine including insurance in a consolidated financial oversight scheme. While avoiding any firm conclusions on what structure future financial services regulation should take, the GAO's report notes that "the portion of firms operating as conglomerates that cross financial sectors of banking, securities, and insurance increased significantly in recent years, but none of the regulators is tasked with assessing the risks posed across the entire financial system" (BestWire, Jan. 12, 2009).

(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)

January 30, 2009

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