NU Online News Service, May 9, 4:55 p.m. — New York
Wall Street securities analysts clashed with insurance regulators here Wednesday over the cost and value of state insurance regulation.
Terri Vaughan, president of the National Association of Insurance Commissioners, Kansas City, Mo., and New York Superintendent Greg Serio defended state insurance regulation at an executive life insurance conference organized by PricewaterhouseCoopers L.L.P., New York.
Consumers need extra help at the state level because insurance “is opaque to the average consumer,” Vaughan said.
Consumers file only a few thousand complaints each year about the banking industry, but they file half a million complaints each year about the insurance industry, Vaughan noted.
Regulators and former regulators at the conference criticized current efforts to give insurers the option of sticking with state regulation or going with a new, federal regulator that would be similar to the Office of the Comptroller of the Currency.
But 80% of the conference attendees who participated in an electronic survey said that, given the option, they would opt out of state regulation in favor of a federal charter.
Joan Zief, managing director of Goldman Sachs & Company, New York, criticized the economics of the current insurance regulatory system and suggested that consumers would be better off if regulators left more to market forces.
“State regulation is detrimental from a cost standpoint,” Zief said.
Why, she asked, is there such a willingness to pay for regulatory protection when “the free market does a great job?”
Zief also recommended letting the market respond to “crummy” policies.
“Aren’t state guarantee funds sufficient?” Zief demanded.