Legislation that would establish a federal Office of Insurance Information has won the qualified support of state insurance regulators, but remains a concern for state lawmakers.
At a June 10 hearing of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Illinois Director of Insurance Michael McRaith said the legislation, which was introduced by subcommittee chairman Paul Kanjorksi, D-Pa., has won the “conditional support” of the National Association of Insurance Commissioners, provided that the powers granted to the proposed OII under the bill are not expanded during the legislative process.
The legislation, known as the Insurance Information Act, or HR 5840, would establish an Office of Insurance Information within the Treasury Department to provide needed expertise to the federal government on insurance issues and to work with the U.S. Trade Representative in dealing with other countries.
McRaith said the NAIC would like to see some parts of the legislation clarified, specifically with regard to the definitions of certain terms and the language of a provision that would allow the Treasury Secretary to stay the pre-emption of state laws that may run afoul of U.S. trade policy.
“Our conditional support,” McRaith added, “also hinges on the proposal not changing in ways detrimental to insurance consumers as it winds its way through the legislative process.”
The legislation, as currently drafted, includes a provision establishing an “advisory group” within the proposed OII and specifically provides that the NAIC would play a primary role in that group. This provision drew the ire of Rhode Island state representative Brian Kennedy, who testified on behalf of the National Conference of Insurance Legislators.
“While acknowledging that that the NAIC is a repository for insurance information, NCOIL believes that giving such a primary role to the NAIC in the OII Advisory Group allows the tail to wag the dog,” he told the committee, adding that “four-fifths” of state insurance commissioners are gubernatorial appointees.
Kennedy also quoted the words of past NAIC President and Alabama Commissioner Walter Bell in saying that the NAIC is not a governmental body and has no regulatory authority. Should the bill be enacted as drafted, Kennedy said, “This would be a dramatic enhancement of the authority for this non-governmental entity known as the NAIC, which comes at the expense of the state officials to whom they are accountable.”
McRaith noted that the legislation provides for a number of as-yet unfilled positions in the advisory group, and that NCOIL could fill at least some of those seats at the table. When asked by Kanjorski if establishing a role specifically for NCOIL within the group would assuage their concerns, Kennedy said that doing so “would probably help us a little bit” towards supporting the concept of a federal OII.
Stronger criticism of the legislation came from one of the committee members, Donald Manzullo, R-Ill., who said he was “astonished” by McRaith’s testimony and warned that the legislation would only serve to move the industry closer to a federalized regulatory system. “That’s how this place works,” he said, explaining that a proposal such as the OII legislation was the “soft punch” to be followed later by a much stronger action.
“This is an attempt to federalize the insurance industry,” Manzullo said. “That’s all it is.”
McRaith said his comments were a “good faith” response to a request by Kanjorski to measure the substance of the legislation, and that he was commenting on this specific legislation and not something that might be put forth in the future.