The insurance industry is one of the most highly regulated industries in the country. As a result, insurers did not warmly embrace the idea of the Federal Insurance Office, created under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The federal government had to make it clear that the FIO would not be another regulator and would have only limited powers to affect an insurance company’s operations.
We are discussing insurance regulation in the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The federal government has traditionally not had a lot to do with the day-to-day operation of the insurance industry, thanks in part to the McCarran-Ferguson Act of 1945. But Dodd-Frank established something called the Federal Insurance Office, and insurance companies, state regulators and consumers alike are wondering what exactly the agency’s role is.
Insurance regulation: Dodd-Frank and the tension between federal and state oversight
To some, particularly citizens in the state of Florida, the Affordable Care Act seems to be working. Federal officials have mandated various insurance companies provide health insurance rebates to insured individuals-millions of dollars in fact. But why?
Lawmakers continue to say that their road to depopulating Citizens Property Insurance Corp. is paved with good intentions. The Florida Legislature is considering a number of bills that would move policyholders out of the state-backed insurer and into the private market. We have been reviewing the provisions included in Senate Bill 7018, including its revamped rating scheme, its step-down plans for limiting the value of eligible homes and its approach to clearing out-of-state homeowners from Citizens’ rolls.
Senate Bill 7018 will go a long way toward moving Florida homeowners out of state-backed Citizens Property Insurance Corp. and into the private insurance market, according to the bill’s authors. The overriding goal is to depopulate (the Senate’s term) Citizens.
If Jan. 1, 2013, was anything like Jan. 1, 2012, about 25 percent more accidents occurred on Florida’s roads than would occur on a normal Tuesday. A leading auto insurer discovered the spike in last year’s claims in a recent study, as we discussed in our last post. Claims filed for New Year’s 2013 may follow the pattern, but they will look much different in other ways, thanks to the state’s new insurance laws.
Following the traumatic events of the terrorist attacks on Sept. 11, 2001, Congress created a risk-sharing program known as the Terrorism Risk Insurance Act. This law will expire at the end of December 2014 and provides for federal backup for insurance coverage, eliminating the situation where many terrorism-related risks could not be insured because of their high premium price, causing insurers and reinsurers to decline to offer policies.
While cynics would say that regulators are closing the barn door long after the horses have bolted, the idea of recognizing beforehand that a bank or investment house or insurance company is too big to fail — that is, too big for us to allow it to fail — offers the rest of us some comfort. Had standards been in place in 2008, perhaps the financial meltdown would be only a worst-case scenario and not a painful memory.
It may surprise some to know that the global financial crisis of 2008 was not the first time the expression “too big to fail” was used. The phrase has, however, become synonymous with the collapse of Lehman Brothers, the near collapse of American International Group Inc. and the near implosion of the stock market. So much so, in fact, that insurance companies and financial institutions will do just about anything not to be labeled as too big to fail.
