Drivers, homeowners and every other American who expects their insurance policies to be there in an emergency can breathe a sigh of relief that an eleventh hour fix saved consumers from insurance deregulation in the financial reform bill. The bill, as approved last week by the House-Senate conference committee, would prevent a new Federal Insurance Office in the Treasury Department from overriding important state insurance protections, including solvency rules that kept U.S. insurance companies stable and paying claims throughout the economic meltdown.
House negotiators turned back efforts by Big Insurance and the reinsurance industry, the Treasury Department, and some Senate conferees to use the financial reform bill to give Treasury broad new authority to write insurance policies abroad that could then preempt stronger state insurance laws. (Download our letter with Public Citizen and US PIRG.)
Big insurers and their allies in Congress have long envisioned a federal insurance office as the first step toward replacing stronger state protections with weak federal oversight.
But their plans to use Wall Street reform as a Trojan Horse for insurance deregulation fell short. House members of Congress took up the call to protect insurance consumers, with California Rep. Jackie Speier leading the fight. (Senator Jeff Merkley of Oregon carried the banner for insurance consumers in the Senate.)
Although Congress could have done more to close loopholes that expose the bill to efforts by the insurance industry to manipulate its intent, the changes won by the House offer significant assurances that state insurance regulatory authority and consumer protections will be maintained.
As approved by conference, the Office is a far cry from big insurers’ dream bill – a federal insurance charter that would allow insurers to opt out of stronger state regulation. We saw how well letting financial institutions pick their regulator worked for bank oversight. But that was exactly what the insurance industry hoped to get out of the financial overhaul. Allstate spelled out just such an intention more than a year ago.
The bill is also a substantial improvement on the initial proposals in both the Senate, and as proposed by the administration, that would have meant a drastic incursion on state insurance regulatory authority by the Treasury Department.
But the fact remains that proponents of the Office intend it to be a springboard for deregulation of the insurance industry. The simple fact that insurance deregulation made it into the financial re-regulation package is a testament to the power of the insurance industry, and the influence it has cultivated on Capitol Hill.
The insurance industry gave $2.4 million in campaign contributions to members of the conference committee on financial reform, and $13.3 million to all members of Congress in the 2010 election cycle, according to data analysed by Consumer Watchdog from the Center for Responsive Politics. (Download the pivot table.)
17 property-casualty, life insurance and reinsurance companies and industry associations, that were main proponents of the Senate language that would have weakened state insurance regulation, spent $52.8 million lobbying Congress since the beginning of 2009, as reported in the U.S. Senate Lobbying Disclosure Act Database. A chart including these companies’ lobbying expenditures, including Allstate, the Association of Life Insurance Companies, and the Association of Bermuda Insurers and Reinsurers’, can be downloaded here.
Consumer Watchdog will be keeping our eye on Treasury to guard against future ‘mission creep’ and efforts to expand the Office’s authority to interfere in state insurance oversight.
