A Treasury official said Tuesday that Congress probably will have to act to solve the regulatory problems facing the U.S. insurance industry.
The proposals under review include those proposed by the National Association of Insurance Commissioners, Kansas City, Mo., as well as the idea of giving insurers the option of choosing federal regulation or of requiring states to enforce federal standards, Randy Quarles, the Treasury under secretary for domestic finance, said at a Senate Banking Committee hearing.
“While we are still evaluating what approach we believe to be the most appropriate, what is clear is that each of them should be assessed” in light of the issues facing the industry, Quarles said.
“Unlike the banking and securities sectors, insurance is solely regulated at the state level, and while this multiplicity of regulators can provide certain benefits in the form of local expertise and control, it does raise a number of issues that deserve further consideration,” Quarles said.
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State price and form controls may create inefficiency, and the state-based system may be having trouble adapting to the evolving needs of the insurance industry, Quarles said.
Quarles pointed out that the European Union has been trying to establish a single insurance regulatory system for all of its members, and that the fractured U.S. regulatory system is one of the top trade issues in discussions with EU representatives.
Scott Harrington, a researcher at the University of Pennsylvania, and Robert Klein, a former NAIC chief economist who is now director of the Center for Risk Management and Insurance Research at Georgia State University, also spoke at the hearing in support of some kind of new role for the federal government in insurance regulation.