Perspectives: Insurers Escape Proposed Consumer Agency's Authority

Jesse A. Hamilton, Washington bureau manager
BestWire Services
A.M. Best Company, Inc.
March 22, 2010


For an industry that has no significant federal regulators, insurance has had plenty of potential ones to defend itself against in this session on Capitol Hill. But at least one of them looks as if it will no longer be an expensive regulatory threat to insurers.

The agency the Obama administration pitched to protect consumers in the financial realm was originally supposed to include mortgage, title and credit insurance. But in its latest incarnation -- embedded within the financial reform bill proposed by Sen. Chris Dodd -- it does not include insurers. Though little can ever be said with certainty in Washington, that provision's absence in this proposal almost surely means insurers have escaped federal regulation by that potential agency.

"We think that that's a good result and the correct result," said Ben McKay, senior vice president of federal government relations at the Property Casualty Insurers Association of America.

And it was quite a bit easier than what insurers faced when the U.S. House of Representatives unveiled and eventually passed its own version of the consumer agency. It wasn't until insurance was actively defended in the House's Financial Services Committee that the mortgage, title and credit insurers were yanked from the bill that was approved. It's months later that Dodd has now unveiled the Senate legislation that will be amended in the Banking, Housing and Urban Development Committee he chairs, and unlike an earlier version of the bill he floated in November, this one doesn't include insurance at the outset.

"So the Senate, rather than going through all those same machinations, cut right to the quick and pulled us out," McKay said.

For Kurt Pfotenhauer, chief executive officer of the American Land Title Association, the bill looks like it's on the right track to be excluding his group's arena, but it could use some edits. "We are working on a couple of language tweaks to make sure the proposal does what it is intended to do and ensure that title insurers are not subject to the new regulatory regimes intended to be applied to financial institutions," he said.

While the bill crosses the consumer agency off the list of insurers' regulatory worries, it still includes a systemic risk regulator that may have oversight over some of the biggest insurance companies and a national insurance office that will have a wide data-collecting reach, though it won't have any regulatory authority. The office has been widely accepted among insurers -- not particularly controversial, as long as it doesn't take a step toward regulation. The systemic risk issue, though, has been a popular point of attacks from insurance groups.

Congress has been trying to jam insurance into financial system reforms that aren't an appropriate place for insurers, McKay said. "It's like trying to put a round peg in a square hole. What they find is it just doesn't fit." The states, he said, are already on the job.

Bottom line in this new bill: Most insurance sectors are not facing anything like the sweeping changes that could be in store for their health insurer counterparts.

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