The recent news about AIG and the financial crisis gripping our nation has many Americans on edge, and it may take some time before relative stability is restored.
But, just when you think you have heard everything, some of the country’s largest financial institutions are now suggesting that the answer to these problems is greater deregulation and a federal takeover of the insurance marketplace.
It would be a monumental mistake to transfer regulatory authority of the insurance business over to the federal government. For one thing, look at the track record of federal agencies when it comes to oversight of financial services. The commercial banks, investment firms, and international holding companies (like AIG) at the center of the nation’s financial crisis are all regulated by the federal government. The savings and loan mess of the 1980s, which cost billions to clean up, also occurred on the watch of a similar federal bureaucracy.
In contrast, most elements of the insurance industry are regulated today at the local level by state officials, and those leaders and policymakers do an excellent job. At a time when crisis and turmoil are the norm in the banking and securities sectors, state regulators continue to quietly ensure that insurance companies are solvent, that claims are paid and that consumers are protected. State officials have experience, outnumber their banking and securities counterparts, handle countless inquiries and questions from consumers, and understand the concerns and particular issues facing the citizens of their area. State oversight of insurance may not be perfect, but its record is far superior to that of the financial regulators at the federal level.
The only people calling for federal oversight of the insurance industry are the big insurance players who desire the same level of weak oversight, accountability and consumer protection that has produced this current crisis. To them, I say, “Thanks, but no thanks.”
William H. Malone
Chairman
Independent Insurance
Agents & Brokers of New Jersey
Trenton