As previously reported here, Representatives Melissa Bean, D-Ill., and Ed Royce, R-Calif., introduced the National Insurance Consumer Protection Act of 2009 (“H.R. 1880”) in the House of Representatives on April 2, 2009. H.R. 1880 would establish an optional, national system of regulation and supervision for insurers and producers.
As with previous legislation proposing optional federal regulation, H.R. 1880 has met controversy. Many large insurers and large financial trade associations support the legislation. These supporters state that H.R. 1880 will (1) enhance efficiency in the insurance market, (2) provide more choices and lower prices for consumers, and (3) create stronger safeguards. Alternatively, many smaller insurers, consumer advocates and state insurance regulator associations oppose H.R. 1880. Those opposing the federal regulation argue H.R. 1880 will weaken protections and raise costs for consumers.
The National Association of Insurance Commissioners (the “NAIC”) has stated its opposition to the optional federal regulation proposed in the H.R. 1880. Roger Sevigny, President of the NAIC and New Hampshire Insurance Commissioner, recently issued a statement regarding the NAIC’s opposition to H.R. 1880. Sevigny stated,
This is not a reform bill, it is a deregulation bill — aimed at stripping the states of insurance oversight authority and denying consumers of the time-tested protections that regulatory power provides . . . . While we agree that reforms are needed, we believe that federal and state regulators should work together in a way that continues to protect consumers and promote financial stability. There are areas in which we might need federal assistance, but that assistance should streamline the strong state-based regulatory framework — not supplant it with a new federal bureaucracy.
Therese M. Vaughan, Chief Executive Officer of the NAIC, recently stated, “What we have now is duplication, overlap, multiple eyes on a problem and checks and balances, so when one regulator makes a mistake, there’s another one waiting in the wings to correct it. If you want to add another layer of eyes, that’s fine with us. Just don’t take our eyes off.”
H.R. 1880 was referred to the House Committee on Financial Services, the Judiciary Committee and the Energy and Commerce Committee and is awaiting review.
We will continue to follow this matter and provide further updates on InsureReinsure.com.