Federal Insurance Office (FIO) Voted Into Existence
A Federal Insurance Office was voted into existence by Congress. The House recently passed the Wall Street Reform and Consumer Protection Act of 2009. The legislation is a great move overall to protect consumerism in the US. The part of the bill that concerns me is the creation of a Federal Insurance Office (FIO). Many years ago, Congress had decided to let the states monitor their own insurance activities. This had operated very well for decades.
The AIG bailout had very little to do with the insurance products that AIG provided for consumers and businesses. The financial sector of AIG is the area that failed horribly. Congress decided to protect all consumers from a financial insurance meltdown. They did not separate the financial sector of AIG from its insurance products when crafting this part of the bill.
There were two things that jumped off the screen when I read them. The FIO is going to be an informational source for the federal government. Why would this be needed unless more regulations are coming down the road? The other and more frightening part of the FIO is the title of systemic risk regulator. There is some mention that the property and casualty arena would be excluded – for now.
Insurance is built on a certain systemic risk or there would be no need for insurance products. Would the FIO regulate Class Codes for Workers Compensation? Could the FIO create its own federal insurer of last resort that would compete with carriers? Will agents have another pile of forms to complete every time an insurance transaction is initiated? I am sure you have your own questions about this change in the insurance system.
I just returned from an NCCI State Advisory meeting in South Carolina. I will cover the meeting more closely and cover NCCI’s prediction of the FIO in my next post. It was right on target.
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