Much debate has swirled around the newly established Federal Office of Insurance (FIO), a branch of the Treasury Department. Some industry insiders say it's a positive move that will give the U.S. a presence on the international insurance stage, shore up cracks in state regulations and boost modernization and transparency in the industry. Others see it as an unwelcome intrusion on the traditional oversight of insurance matters by the individual states.
[See also LifeHealthPro's earlier look at the regulatory environment in Regs Rule: A Closer Look at the Fiduciary Standard.]
For its part, NAIFA is not opposed to the FIO, although it supports the right of states to continue to promulgate insurance regulations.
In a comment letter, NAIFA president Robert Miller stated: "We believe there are areas where the status quo must change. We believe the FIO can play an important part in efforts to educate, coordinate, modernize and reform regulations."
Specifically, NAIFA is in favor of NARAB II, which would permit insurance producers licensed to practice in several states to comply with a single-set of non-resident licensing and continuing education standards. It also supports the NAIC Suitability in Annuities Transaction Model Regulation, which has been enacted in several states.
O'Brien says one of the FIO's main charges is to study ways to improve consumer protection, "which is always good." However, she's concerned the agency might overreach and meddle in actual product design and mandate onerous disclosure rules.
"That kind of conversation concerns us because what ends up [happening] is the consumer loses because they have less choice. They have more costs in the products they are purchasing," O'Brien says.
Better to have the individual states regulate insurance in their jurisdictions, O'Brien contends. That way, insurance companies and regulators are forced to work together to devise products that benefit the companies and consumers in that state.
"When you take it out of the state, there is not that motivation," O'Brien says. "The business may be 5,000 miles away from D.C. We also know D.C. can get quite insular. You can't do that in the state. The people hold you a lot more accountable and there is a much brighter spotlight on the insurance commissioner in Maryland or Michigan."
Not that everything on the state level works smoothly. O'Brien says that several states "have gone rogue a bit." (She mentions Florida, Utah and Nevada by name.) In several states, the securities departments are "digging into the insurance side of the regulatory jurisdiction" and levying more regulation on insurance products, like annuities and life insurance.
