Treasury Secretary Henry Paulson said Wednesday that the Bush administration will think very carefully about the possibility of letting insurers choose between state and federal oversight.
Paulson talked about the topic during a Senate Banking Committee hearing that focused mainly on U.S. international competitiveness and U.S. relations with China.
The American Council of Life Insurers, Washington, and a number of other insurer groups have supported the idea of giving insurers an option to adopt a federal charter and come under the jurisdiction of a new federal insurance regulatory agency, rather than remaining under the jurisdiction of state insurance regulators.
“Although we don’t have a clear position yet on the optional federal charter, I personally think it’s got a lot of merit,” Paulson said in response to questions at the Senate Banking Committee hearing.
Frank Keating, president of the American Council of Life Insurers, Washington, praised Paulson’s comments.
“While we’re committed to working with the states to improve the state-based system, we feel the optional federal charter is an essential component of a modern regulatory system, given the increasing national and global nature of our business,” Keating said.
Kevin McKechnie, government relations director at the American Bankers Insurance Association, Washington, said he was “very encouraged” by Paulson’s remarks.
During the hearing, Paulson also talked about the possibility that helping Chinese consumers buy insurance and other financial products could be important to easing the current gap between the value of Chinese exports to the United States and U.S. exports to China.
“China needs to restructure its economy so that household consumption–rather than exports and excess investment–powers growth,” Paulson said. “This is the only way China can grow without generating huge trade surpluses.”
To encourage Chinese households to spend more, Chinese policy must help make Chinese consumers feel more secure about spending, Paulson said.
Today, “only 20% of the 800 million people who live in rural areas have health insurance,” Paulson said. “The basic government pension covered only 17% of Chinese workers in 2005. And only 14% of the population is covered by unemployment insurance.”
If China had a better health finance system, a stronger social safety net and more use of financial products, its people might consume more, Paulson said.