Posted on 30 Apr 2010
The Property Casualty Insurers Association of America (PCI) urges a measured approach to financial services regulatory reform following the Senate's vote on Wednesday to proceed to debate on the "Restoring American Financial Stability Act of 2010".
"We look forward to continuing to work with Senate leaders on key issues to help improve the financial services reform bill," said David A. Sampson, president and CEO of PCI. "Home, auto and business insurance companies are dedicated to seeking balanced solutions for improving the financial services sector that focus on protecting consumers and promoting market efficiency."
PCI remains concerned with the potential negative consequences of including insurance companies in the banking reform legislation. Insurers should not be required to pay into two resolution funds, one at the state level and one at the federal level. Furthermore, the Senate bill should be amended to reduce duplicative, costly data collection under the proposed Office of National Insurance (ONI) and Office of Financial Research (OFR).
“We believe that every industry should pay for its own failures and no financial sector should be carved out of financial reform,” said Sampson. “Resolution funds play an important role in protecting consumers. That is why insurers already have effective resolution funds in every state.”
State insurance regulators have a proven system of protecting insurance consumers. State regulators enforce stringent solvency requirements, product regulation and post-sale safeguards for insurance products. All home, auto and business insurance companies are also subject to a state resolution process through the existing system of state guaranty funds – which is funded solely by the insurance industry.
“Insurers should not be required to pay into two resolution funds, one at the state level and another one at the federal level for banks,” said Sampson. “This is redundant and would unfairly increase costs for insurance consumers.”
Additionally, the proposed ONI and OFR would add layers of duplicative information and data gathering for insurance that could result in inefficiencies in the marketplace, without benefit to the consumer. To require, as the bill would do, three layers of duplicative data collection (state insurance commissioners, ONI and OFR) is an inefficient and costly use of resources for state regulators, the federal government, and insurance companies who should be focused on job growth. The ONI would also raise major concerns about state preemption regarding what types of information can be collected from insurance policyholders.
“Property casualty insurers could also face duplicative and costly data collection requests from the proposed Office of National Insurance and the proposed Office of Financial Research in addition to state insurance departments,” said Sampson. “This would result in insurance companies paying for three layers of duplicative information reporting that would increase costs to customers without any corresponding consumer benefit. Insurers already comply with stringent data and information reporting requirements from state regulators in all 50 states.”
Making home, auto and business insurance companies pay for duplicative resolution funds and federal oversight would impose real burdens on an industry that has remained stable through the financial crisis and contributes to the economic foundation of local communities. Property casualty insurance companies provide over 480,000 jobs across the country and the insurance sector paid $14.7 billion in state premium taxes last year. Duplicative regulation also threatens to increase consumer costs for the close to 270 million insured homes and vehicles that are protected by property casualty insurance across the nation.