Three conservative public policy organizations are taking on 33 governors in a battle over state insurance regulation.
The think tanks have written to congressional leaders to oppose a letter supporting state insurance regulation that the governors sent to the leaders of the House Finance Committee and the Senate Banking Committee March 23.
The authors of the think tank letter are Eli Lehrer, a senior fellow at the Competitive Enterprise Institute, Washington; Wayne Brough, chief economist at FreedomWorks, Washington; and Stephen Pociask, chief economist at the American Consumer Institute, Washington.
The governors asked in their letter that Senate Finance Committee and House Financial Services Committee members “review, and ultimately reject, congressional efforts to create an Optional Federal Charter for purposes of regulating the insurance industry.”
Advocates of the OFC approach want to give insurers and possibly insurance agents and brokers the ability to choose between coming under the jurisdiction of the traditional state-based insurance regulation system or coming under the jurisdiction of a new federal insurance regulatory agency.
The governors write in their letter that they understand the need to modernize the state regulatory system and want to be part of Congress’s regulatory reform process.
Like the governors, the conservative think tanks sent their letter to the chairmen and highest-ranking Republican members of the Senate Banking Committee and the House Financial Services Committee.
The think tank representatives say they reject the assertion “that states…often lead the way with regard to reform and innovation and this is true of insurance regulation.”
The state insurance regulatory system “has not served the interests of innovators or consumers well” because “no fundamentally new personal lines insurance products have become available since modern all-perils homeowners’ insurance first became available in 1959,” the think tank reps write.
The think tank reps also reject claims by the governors that the “state regulatory system…has remained sound despite the catastrophic disruptions we have witnessed as a result of failed federal oversight and regulation.”
“The soundness of the state regulatory system remains unproven,” the think tank reps write.
New York, whose governor is not among the signers of the letter sent to Congress, authorized American International Group Inc., New York, to raid its property-casualty subsidiaries for funds when the company nearly collapsed last fall, the think tank reps write.
“Recent reports, likewise, indicate that many of AIG’s other state-regulated subsidiaries have financial problems of their own.” the think tank reps write. “The state-level insurance system, in short, has not avoided the problems that have afflicted other financial sectors.”
The think tank reps also reject assertions by the governors that, under the “Treasury model,” states stand to lose revenue generated from current fees and assessments.
The version of the legislation that could have cut state fee and assessment revenue was proposed under the Bush administration, and is “something that the Obama administration appears [un]likely to enact without changes,” the think tank reps write.
H.R. 1880, an OFC bill introduced by Reps. Melissa Bean, D-Ill., and Edward Royce, R-Calif., would let states keep the premium taxes assessed on insurance companies, the think tank reps write.
“Many of the key claims that the governors make lack a sound evidentiary basis,” the think tank reps conclude.