America is still reeling from the 2007 financial crash, brought on in part by federal government failures.
The Financial Crisis Inquiry Commission said factors contributing to the downturn included “widespread failures in financial regulation, including the Federal Reserve's failure to stem the tide of toxic mortgages … key policymakers ill-prepared for the crisis, lacking a full understanding of the financial system they oversaw (and) systemic breaches in accountability and ethics at all levels.”
Brace yourself: Now Washington wants to regulate insurance.
For more than 150 years, the states have protected consumers while maintaining vibrant and solvent insurance markets. Insurance commissioners are elected by the people in 11 states, including Oklahoma. Most others are appointed by their governors. Unlike federal bureaucrats, state commissioners are more directly accountable to voters.
Since 1871, the National Association of Insurance Commissioners has helped states set regulatory benchmarks and pursue mutual goals, modernizing insurance regulation and facilitating business across state lines.
But a new federal bureaucracy — the Federal Insurance Office (FIO) — was established by the massive Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This new agency within the U.S. Treasury Department provides added oversight for an industry already among America's best regulated.
The move might make sense if insurers played a major role in the meltdown, but they didn't. Even in the case of taxpayer-rescued AIG, it was not the company's insurance business that crashed. Periodic financial exams and strong capital requirements set by state regulators minimize failures. Each state maintains a guarantee fund protecting consumers in the event of a company's insolvency and no state's guarantee fund has ever failed to pay when a company failed.
So it's ironic the feds, with their poor regulatory record, decided also to get involved with insurance. Further, it's alarming the FIO was granted new powers to monitor solvency and assess systemic risk in the industry (something states already do), to pre-empt certain state laws, and to label some insurance companies “non-bank financial institutions” subject to oversight by the Federal Reserve.
The Oklahoma Insurance Department operates almost exclusively without funding from taxpayer dollars, and in the coming legislative session we will introduce a bill to cut that taxpayer funding to zero. Conversely, funding this new federal agency will cost American taxpayers, while insurers' costs of complying with a new layer of government will be passed along to American consumers on their premiums.
Proposals to let insurers choose federal chartering over state licensing could strip me of my power to promptly revoke state licensing of suspect agents or companies. Oklahoma consumers will suffer if D.C. is left to investigate insurance fraud or resolve claim disputes.
This year I have met with consumers in all 77 Oklahoma counties, something I plan to do every year in office. Don't hold your breath waiting on Washington to show up in Woodward or Wilburton.