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May 07, 2009 at 08:00 PM
The U.S. Government Accountability Office has prepared a state insurance regulatory system critique for a congressional subcommittee that is about to consider federal insurance oversight.
Despite efforts to make the state producer licensing, product approval and market conduct processes more similar, big differences remain, and some of those differences, such as differences in producer background check standards, can cause problems, GAO officials write in the report.
“Without full checks on applicants, states may less effectively protect consumers,” officials warn.
A team led by Orice Williams, a GAO director, prepared the report for Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Committee’s capital markets subcommittee; Rep. Scott Garrett, the highest-ranking Republican on the capital markets subcommittee, and Rep. Spencer Bachus, R-Ala., the highest-ranking Republican on the House Financial Services Committee.
The subcommittee today scheduled a May 14 hearing with the title, “How Should The Federal Government Oversee Insurance?”
“Licensing standards, including how state regulators define lines of insurance, also vary across states, further hindering efforts to create reciprocity in agent licensing,” GAO officials write in their report. “These differences may result in inefficiencies that raise costs for insurers and consumers.”
As Congress considers proposals for changing regulation of the insurance industry, it should try to ensure that all states and jurisdictions include nationwide criminal background checks in their producer-licensing and consumer-protection operations, officials write.
A working group at the National Association of Insurance Commissioners, Kansas City, Mo., found that, as of March 2009, only 17 states were performing full criminal history checks using fingerprinting, GAO officials write.
Some states that do perform full criminal history checks have been unwilling to reciprocate with states that do not, and “some insurance regulators in our sample noted that regulators do not have a systematic way to access disciplinary records of other financial regulators,” officials write.
