“In our view, insurance solvency regulation and consumer protection are inextricably linked,” Tyler told members of the U.S. House Committee on Financial Services. “State insurance regulators have long been responsible for not only the safety and soundness of an insurer, but also how the insurer treats its customers and what protections are in place around its often complex products.”
“The states have developed a wide range of consumer protection tools designed around these complex products and unique interactions between insurers and policyholders,” Tyler testified. “For these reasons, we believe a new agency to regulate consumer protections in insurance is not necessary, and would cause the kind of overlaps that lead to preemption of state laws and rules designed specifically to address the complexities of insurance.”
Tyler highlighted the numerous strides made by the states to enhance consumer protection, such as streamlining of the company and producer licensing processes, increasing consumer services and education, fighting fraud, and establishing the Interstate Insurance Product Regulation Compact for life and annuities products. He credited the high level of communication and coordination among the states in catching consumer abuses and minimizing redundancies. “Stripping this fundamental authority from the states, or bifurcating it with a federal entity that inevitably will cause conflicts, confusion, and down the road, preemption, will do nothing to solve the problems exposed by our financial crisis,” Tyler noted.
“As a state insurance regulator, it is not for me to decide whether a separate agency is necessary for other financial sectors, or whether empowering existing regulators with a consumer protection mandate is the best course of action for those different products,” Tyler emphasized. “What the Congress should not do, in our view, is to empower that agency to wade into insurance – an area where strong consumer protections have long been a fundamental tenet of supervision and embedded in our regulatory and legal systems.”