GAO Supports Insurance Regulator Access To FBI Criminal Database

GAO Supports Insurance Regulator Access To FBI Criminal Database

A General Accounting Office study is providing support for a provision in the so-called “roadmap” legislation that will allow state insurance regulators access to the FBIs nationwide criminal history data.

And, a staff official at a key constituency, the Independent Insurance Agents and Brokers of America, said that group is also supportive of the provision as a means of weeding out the bad eggs that lose their license to sell insurance in one state, then move on to another state where they gain another license because there is no known clearinghouse that would provide notice of prior problems.

Among its conclusions, the GAO report says that, among other findings, “…we found that many state regulators, unlike their counterparts in the banking, securities and futures industries, continue to lack the legal authority to access the FBIs nationwide criminal history data. According to information obtained from state regulators and the FBI, fewer than one-third of the states have taken actions that current federal law requires for them to have such authority.

“Consequently, regulators in other states cannot be sure that they are protecting insurance consumers from fraud by keeping individuals previously convicted of serious criminal behavior out of the business of insurance,” the report says. The report also found that financial regulators generally did not have ready access to all relevant data related to regulatory enforcement actions taken against individuals or firms.

The results of the study are a victory for Reps. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, and Richard Baker, R-La., chairman of a key subcommittee. The pair shepherded legislation that passed the House in November 2001 that would have allowed state regulators across the board to access the FBI files as part of their application for state insurance licenses. The bill had another provision that would have allowed over 250 different regulators access to each others files in order to ensure that “bad actors,” those who have committed fraud and other misdeeds, cannot pull up stakes and move to another area or industry after being caught.”

Wes Bissett, senior vice president for government affairs and state relations at the IIABA, said, “We supported that bill then, especially the provision allowing state regulators access to the FBI criminal files for licensing applications processing, and we continue to support the Oxley-Baker federal standards approach, and its inclusion of that provision.”

The original legislation was drafted in the wake of the Martin Frankel scandal. Frankel, since convicted, allegedly was able to swindle millions of dollars from consumers in the insurance industry despite having already been banned from the securities industry by the SEC.