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Dr. Steven Weisbart, CLU, of the Insurance Information Institute talks about the need to restructure insurance regulation as financial services become more globalized.

The U.S. insurance industry is regulated by the individual states. Rate regulation is aimed at striking a balance so that rates ensure solvency but are not excessive or unfairly discriminatory. Increasingly too, government regulators have focused on making insurance affordable and accessible.
Many in the insurance industry see the current state systems as overly complex, anti-competitive and unduly burdensome, increasing the cost of compliance and delaying the launch of new products. With the increasing globalization of financial services, there is new impetus to restructure insurance regulation for greater efficiency.
Some companies support the concept of a federal system that provides one-stop regulatory approval. Others believe the merits of a state system outweigh the virtues of a single regulator. All agree that some form of regulatory modernization is needed.

Key Public Policy and Industry Issues

A variety of proposed state and federal public policies are aimed at strengthening the insurance industry and its ability to serve commercial and individual customers. Key areas of consideration for policymakers include:
  • Modernizing State-Based Regulation—One proposal would create a national system of state-based regulation that would develop and implement uniform standards in such areas as market conduct, licensing, the filing of new products and reinsurance.
  • An Optional Federal Role in Insurance Regulation—Many policymakers, as well as some members of the insurance industry, believe that the federal government can help improve and streamline insurance regulation. Congress has considered but not yet enacted legislation that would give insurers the option to be regulated at the federal level rather than by the states. (For more information go to Optional Federal Charter [link to Overview: Optional Federal Charter])
  • Regulatory Reform for Large Policyholders—Over the last decade, many members of the insurance industry have advocated for federal action that will simplify the regulatory system for commercial insurance. While no substantial federal action has been taken on this issue, several states have taken steps to ease regulation for large corporations, which have the expertise to evaluate complex insurance contracts. Nevertheless, some insurance brokers maintain that multistate compliance costs lead companies to seek more affordable insurance from offshore companies.

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