An Insurance Czar? I Don't Think So!
September 2009
As a performing blues guitarist and
occasional lead singer, and as the guest of a variety of groups, I often do
some of my own music. One first verse which comes to mind is:
Why's your face familiar?
Have we met before?
She just smiled,
And simply said,
I've heard that line before.
This makes me wonder, have we not heard "lines" over and over within our industry during the past decade or more?
by Peter
M. Polstein
But now, we are hearing a more ominous line being sung by a president,
House, and Senate who are attempting to move at an unparalleled speed toward
what some are calling a totalitarian socialist government. Within our industry, on June 17, the
Administration issued a white paper outlining insurance sector regulation.
Accomplished by the Treasury Department, it's titled "Financial
Regulation Reform, a New Foundation."
The legislation proposed would establish yet
another, czar to run the "Office of National Insurance," which would gather
information, develop expertise, negotiate a wide variety of international
agreements, and coordinate all policy within the sector. The proposed
legislation points to the "current crisis" within the industry, without
providing particulars, which is par for the course, except to point to AIG,
while explaining that its problem was brought about outside of the
traditional insurance business.
The Treasury appears to believe that our
industry lacks uniformity, is inefficient, has reduced product innovation,
and as such, produces higher premiums to the purchasing public as the
result. While the state-controlled basis of regulatory issues may need an
overhaul, the remaining contentions are nothing more than contrived
government speak.
The Treasury points out that beyond some specific areas
of responsibility, e.g., employee benefits, flood insurance, anti-money
laundering—all of which is of "critical importance"—there is no "well-functioning" standard; therefore, let's create a federal Office of
National Insurance (ONI) within the framework of the Treasury. Having spent
some time within the intelligence community, if I were in Office of Naval
Intelligence, I might find some umbrage in the acronym.
The legislation
then launches into a description of their astute challenge to themselves,
which includes:
- The identification of emerging problems or gaps
in regulatory matters that might contribute to a future crisis.
- The development of systemic risk regulation, thereby reducing risk.
- The regulation of "strong capital standards" and appropriately
matched capital adequacy to risk. Within this particular segment of the
structure, they again are quick to point out that the current so-called
crisis did not stem from insurance business. However, this legislation would
provide enhanced security relative to the management of liquidity and
duration of risk.
- The monitoring and setting of guidelines for "meaningful and consistent consumer protection" within the industry, against
what apparently has been a lack of this under the current inefficient and
faulty system.
- The coordination and consolidation of a sweeping
number of gaps within the system, as well as improvement of the industry's
international framework, thereby providing an "export" vehicle with
standardized regulatory language which would enhance economic efficiency.
OK, all of this coming from a Treasury Department whose head seems to be totally out
of his league, with a department over the past decade or more that has been
so inefficient and mindless as to the happenings within the Treasury and the
nation that, during the past year, it has found itself in economic shambles.
But then, there is always sufficient number of folks to blame, aren't there?
Now they have all of the expertise required to manage a $5.7 trillion asset
base with over 2.3 million jobs, which represents over one-third of the
entire financial sector. I don't think so!
While there may well be a number of "problem" areas within our industry,
state regulations, holding company regulations, certain tax matters
(especially in dealing with nondomestic insurers), to mention a few, another
government czar is just about the last thing we need. Somewhere along the
line, we seem to have gotten along fairly well despite the usual bumps in
the road.
And the reprise:
Why's your face familiar?
Have we met before?
She just smiled,
And simply said,
I've heard that line before.
Haven't we all!
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