CHICAGO — Insurance regulation is likely to remain a state function, Illinois Insurance Director Michael McRaith said Thursday at a conference.
“State insurance regulation is under attack, but an optional federal charter won’t happen,” McRaith told attendees here at the national conference of the National African-American Insurance Association, Washington.
Advocates of the OFC concept want to give insurers a chance to choose between a state charter and oversight by the traditional state-run regulatory system, or a national charter and oversight by a federal regulatory agency.
When it comes to handling interstate licensing, state regulators “could do it better,” McRaith said, but, he defended the state regulatory system as making the most sense for products that are designed and sold to address local needs.
Proposed OFC bills would not work because of the inevitable conflicts that would arise when multiple regulators examine insurance products using multiple standards, McRaith said.
McRaith compared the push by many large insurers for optional federal chartering to the credit card companies’ efforts to pass the Bankruptcy Reform Act of 2005.
Insurance is too unique and personal to be lumped in with other financial products, and that reality was recognized even when Franklin Roosevelt was president, McRaith said.
McRaith noted that in 1932, 40% of all banks closed, ushering in the election of Roosevelt, the New Deal, and an unprecedented number of financial oversight initiatives.
But even the regulation-minded Roosevelt administration “never touched insurance,” recognizing it as a local product, sold as an interstate transaction, and not traded on any public exchange, McRaith said.