None of us saw this one coming.
Framing regulatory reform as free competition is getting
From a congressional production standpoint, presidential
election years are usually a snore—when gesticulation
triumphs over reasoned debate and political posturing
overwhelms the process of legislative compromise.
In terms of big picture resolution of major issues affecting
the insurance industry, that’s been the case this year.
But there have been a number of significant developments that
have, frankly, surprised me.
Conventional wisdom would have held that little to no
progress on broad insurance reform would be made in a year like
this. But—say what you will about the Bush Administration
and its record-low approval ratings in its final
year—Treasury Secretary Hank Paulson’s progressive
“Blueprint for Financial Services Regulatory
Modernization” galvanized the entire sector.
How else would anyone have anticipated that witnesses for
the National Association of Insurance Commissioners and the
National Conference of Insurance Legislators (NCOIL) would be
going at each other’s throats during a regulatory reform
hearing before the House Financial Services Committee?
How else would anyone have imagined Sen. Richard Shelby,
R-Ala., the ranking minority member and former chairman of the
Senate Banking Committee, stating fairly strong philosophical
agreement with the concept of an optional federal charter at a
similar hearing of his committee? Shelby is a
conservative’s conservative—deeply skeptical about
anything that could expand the contingent liability of the
federal government. Yet Paulson’s plan has framed the
issue of regulatory reform as one not of big government versus
small, but rather of free and open national competition. Shelby
None of us jaded insurance lobbyists in the room saw that
How else could no one have blinked when John McCain, in the
midst of the critical Florida Republican primary, endorsed an
optional federal charter as the legislative answer to the
catastrophic insurance crisis (instead of a federal Nat-Cat
I’ve been searching for months to find the smart
lobbyist who approached McCain on this issue. Until that
moment, no major candidate for president ever had embraced the
need for a national federal insurance regulator.
And, perhaps most importantly, how else could House
Insurance Subcommittee Chairman Paul Kanjorski, D-Pa., have
moved with such ease in passing legislation (with bipartisan
consensus) that would establish a federal “Office of
Insurance Information” housed in the Treasury Department?
Such an office would have limited authority to preempt states
(only to the extent that state insurance laws inhibit relations
with other countries). The office would be an unprecedented
federal toehold in the state regulatory sphere. Kanjorski went
a long way toward breaking up the circular firing squad that
has defined the state-versus-federal debate for years.
To be sure, none of this is real until it is enacted, and
given how much is in play during the elections this year, the
future is murky. But some reasonable projections can be
First, the Office of Insurance Information (OII) legislation
will pass the House of Representatives, notwithstanding a
frivolous complaint from some California legislators that it
would upend their sanctified-but-invasive Proposition 103
Senate Banking Committee Chairman Chris Dodd, D-Conn., has
indicated this bill (plus The Council’s number-one
priority: surplus lines reform) may be the only reform around
which Congress can build consensus in the remaining few
legislative days in this session. Given the plodding way the
Senate operates, it may be that the OII legislation will take
some further vetting and will be a 2009 issue, not resolved in