For many months, NAMIC has been aggressively urging both the administration and Congress to exclude property/casualty insurance products in any new federal financial consumer protection regime created in response to the current economic crisis. We can now report that our advocacy efforts have been successful and most property/casualty insurance has been specifically excluded from the jurisdiction of a recently released proposal.
A major piece of the Obama Administration’s proposals for financial services regulatory reform is the creation of a new independent entity called the Consumer Financial Protection Agency (CFPA). On June 30, 2009, the administration released its draft legislation for the creation of the CFPA which specifically excludes insurance from the jurisdiction of the new agency. The list defining "financial activities" covered by the draft bill is numerous. However, it specifically states that "the Agency shall not define engaging in the business of insurance as a financial activity.” However, those insurers that underwrite title, mortgage, and credit insurance – which are technically property/casualty insurance – will be subject to additional oversight by the new agency.
The CFPA would oversee all consumer protection rulemaking and regulations with regard to consumer financial products and services. The administration – through the CFPA – is seeking to reform federal consumer protection based around the principles of transparency, simplicity, fairness, accountability, and access. However, the means by which the CFPA aims to meet these goals would place a huge new regulatory burden upon business.
The financial services community is united in its opposition to the creation of this new federal oversight agency. The CFPA will lead to dual regulation between the federal government and the states as well as conflicts between consumer protections laws administered by other federal agencies such as the Securities and Exchange Commission and the Federal Trade Commission. By placing too much emphasis on prohibitive consumer protections the administration risks weakening markets, innovation, and competition.
While most property/casualty insurance products are currently excluded from the administration’s plans, this is draft legislation and there remains much debate ahead - as well as possibly new, separate legislation to be prepared by the House and Senate. That said, NAMIC is encouraged that supporters of the CFPA recognize that property/casualty insurance is already strongly regulated at the state level and differs greatly from the predatory lending, credit, and investment products and activities targeted by the new agency.
NAMIC continues to work closely with the administration and Congress to adequately address concerns over consumer protection while ensuring the property/casualty industry is excluded and the state-based regulatory system maintained. We will keep you informed of any developments as this proposal moves through Congress.
Direct questions to Dylan Jones.