eral Insurance Commission specified in S. 1710, are both extensive and concentrated. Our statement reviews them in some detail. They parallel in part the oversight responsibilities of both the FDIC and the Comptroller of the Currency. The Federal Insurance Commission would also include, of course, all the programs and responsibilities of the Federal Insurance Administration now in the Department of Housing and Urban Development. Given the extent of its power and the political pressures which would undoubtedly affect the Commission, it is quite probable that the Commission would be prodded to expand its regulatory role well beyond solvency issues to involve most if not all aspects of insurance company management. To demonstrate this point, just consider the nature of the actual powers proposed for the Commission. These powers must be viewed in the context and the environment in which they would be employed. Policyholders, consumer groups and others have increasingly been seeking political solutions to insurance problems, not only at the State level but in Washington, as well. And it is under this environment of complex and increasing political pressures that the Commission would exercise its powers. One can estimate the potential size of the Federal Insurance Commission by comparing it to the FDIC, after which it was patterned in part, the Federal Insurance Administration which it would absorb and the Comptroller of the Currency function which conducts parallel and extensive examinations of federally chartered banks. It is not improbable that a Federal Insurance Commission once fully operational would employ several thousand employees both in Washington and the field with an operating budget that could easily exceed $100 million. To what extent would duplicate and/or parallel State and Federal regulatory system require an increase in paperwork? The overlap would be extensive for those companies with State charters who join the Federal guarantee program. But, the overlap does not stop with those companies. Section 107 (b) of the bill authorizes the Federal Insurance Commission to establish "an early warning system." Further, it states that "In order to render possible comparison and thus make available broad financial and statistical data, any such 'early warning system' may include both federally guaranteed insurers and other insurers." The phrase "and other insurers" clearly gives the Federal Insurance Commission the authority to require reports, data, et cetera from all insurers even though they may be State chartered and do not participate in the Federal guarantee fund. The goals of insurance regulation were stated in 1960 by the NAAIC to be: First. That insurance coverages desired by the public should be generally available to the public from licensed insurers; Second. The cost of such insurance coverages to the public should be reasonable and not excessive; Third. That the solvency of insurers should be maintained in the interest and for the continued protection of their policyholders; Fourth. That each insured should bear his fair share of insurance cost. The means of achieving these goals, however, are necessarily complex. While each of these objectives are not necessarily mutually exclusive, they do conflict, to some degree. The true measure of the efficiency of insurance regulation is not how well each of the above-mentioned objectives is achieved, but how well they are balanced in the actual world. It is obvious that to achieve good, balanced insurance regulation, the responsibility for achieving the regulatory ends cannot be "split between competing sovereigns." Yet, this is exactly what S. 1710 would do. It would create, within the Federal Establishment, a Federal Government authority which will compete and share with State government the responsibility to regulate the insurance business. S. 1710 goes considerably beyond its stated objectives. It will ultimately totally realign and unsettle the competitive structure of the insurance business, leading to considerably greater territorial market concentration that exists today. The effect will be less competition, less service, and less public protection. It will also lead to more regulation, more litigation, greater uncertainty, and certainly more paperwork. S. 1710 would bring into being, extensive regulatory changes seriously disrupting the operation of the existing State insolvency protection mechanism. Additionally, the legislation will undermine the security markets for publicly held companies, while insurance investments may well become highly concentrated in only the highest quality blue chip in vestments. Finally, S. 1710 will require the establishment of a vast new Federal bureaucracy at a time when the President, Congress, businessmen, and the electorate have made it clear again and again that what this country requires is less regulation and a contraction of existing Federal regulatory agencies. [Complete statement of Mr. Maisonpierre follows:] DUAL AND CONCURRENT REGULATION OF INSURANCE STATEMENT OF THE ALLIANCE OF AMERICAN INSURERS before the SENATE COMMITTEE ON BANKING HOUSING AND URBAN AFFAIRS on S. 1710 THE FEDERAL INSURANCE ACT OF 1977 SEPTEMBER 13, 1977 (Alliance of American Insurers HIGHLIGHTS OF ALLIANCE STATEMENT The Alliance is convinced that dual regulation of insurance would be unwieldy and duplicative while also breeding competition among regulators that would lead to increased economic regulation. (pages 3-12) The bill (S.1710) would: ...undermine the security's market for publicly held ...substantially hamper the ability of small companies to ... undermine the stability of state workers' compensation ...reduce the ability of companies to meet consumer ...substantially weaken consumer protection against ...require the creation of a vast new federal bureaucracy The goals of insurance regulation seek to maintain a viable insurance market in which consumers may secure their insurance needs at reasonable costs in a competitive environment. It is obvious to the Alliance that to achieve good, balanced insurance regulation, the responsibility for achieving the regulatory ends cannot be "split between competing sovereigns." (pages 38-40) |