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From another perspective 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 Currancy function
which conducts parallel and extensive examinations of federally
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
3535 total employees, of which 70 percent were located in
The FDIC was responsible for supervising 8979
commercial and mutual savings banks, with assets of $335.3
billion, according to their 1976 Annual Report.
The Comptroller of the Currency has upwards of 3000 employees
with and operating budget in excess of $68 million
responsible for examining 4600 national and District of
... The Federal Insurance Administration has 298 employees and
an annual operating budget of
more than $? 6 million.
To what extent would duplicate and/or parallel state and federal
regulatory systems require an increase in paper work?
for a moment those areas where separate and different reports would
ostensibly be required by both state and federal regulators.
overlap would be extensive for those companies with state charters
who join the federal guarantee program.
Overall reports on financial condition, investments, claim
Early warning systems in operation at both the state and
Probable special reports on insurance availability and
affordability that could include closed claims studies.
Reports on rate adequacy to meet minimum reserve requireme?ts.
Reports on rating and classification practices to monitor
It is instructive to analyze the implications of this concern
for duplicate and parallel reporting.
Section 107(b) of the bill.
authorizes the Federal Insurance Commission to establish "an ezr.
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 Suth
federally guaranteed insurers and other insurers.
( Emphasis added)
The phrase "and other insurers" clearly gives the Federal Insurance
Commission the authority to require reports, data, etc. 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
NA IC to be:
"That insurance coverages desired by the public should be
generally available to the public from licensed insurers;
The cost of such insurance coverages to the public should
be reasonable and not extensive;
That the solvency of insurers should be maintained in the
interest and for the continued protection of their policyholders;
That each insured should bear his fair share of insurance
As evidence of their durability, these principles are just as
valid today as they were in 1960.
Simply stated, these goals seek
to maintain a viable insurance market in which consumers may secure
their insurance needs at reasonable costs in a competitive
The means of achieving these goals, however, are necessarily
While each of these objectives are not necessarily
mutually exclusive, they do conflict, to some degree.
instance, it would be simple to insure that "solvency of insurers
should be ma inta ined" by requiring that minimum insurance rates be
pegged to meet the needs of the least efficient insurers.
this would unquestionably lead to excessive insurance prices.
The true measure of the efficiency of insurance regulation
is not how well each of the above mentioned objectives is reached
by and of itself, but how well they are balanced in the actual
In the recent past, in a few states, the regulation
of insurance has been politicized through the simple mechanism
of preventing adequate rate levels.
While this may have temporar
ily provided consumers with "bargain price" insurance, in those
states where this has occurred the market has become unstable,
resulting in a serious availability crisis.
Thus, these short
run, temporary consumer advantages are quickly lost and, in the
the insurance public is ill-served by such short-sighted
It is obvious that to achieve good, balanced insurance regu
which will compete and share with state government the responsibility
to regulate the insurance business.
s. 1710 goes considerably beyond its stated objectives
authorize the issuance of federal charters to insurance companies
and to establish "alternate federal insurance guarantee mechanisms."
It will ultimately totally realign and unsettle the competitive
structure of the insurance business, leading to considerably įreater
territorial market concentration in existence today.
will be less competition, less service and less public protection.
It will also lead to more regulation, more litigation, greater
ur certainty and certainly more paper work.
s. 1710 would bring into being, extensive regulatory changes..
may well become highly concentrated in only the highest quality blue
Finally. s. 1710 will require the establishment of a vast new
federal bureaucracy at a time when the President, Congress, business
men 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.
This is particularly valid with respect
to the concern for the prospect of concentrated regulatory power in
a few hands in Washington.