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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

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

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3535 total employees, of which 70 percent were located in

the field.

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

and is

responsible for examining 4600 national and District of

Columbia banks.

... The Federal Insurance Administration has 298 employees and

an annual operating budget of

more than $? 6 million.

- 37

To what extent would duplicate and/or parallel state and federal

regulatory systems require an increase in paper work?

Let's consider

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

reserves, operations.


Early warning systems in operation at both the state and

federal level.


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

potential discrimination.

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.

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 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.

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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

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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

long run

the insurance public is ill-served by such short-sighted


It is obvious that to achieve good, balanced insurance regu

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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.

The effect

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..

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may well become highly concentrated in only the highest quality blue

chip investments.

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.

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