Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

Chairman Kanjorski noted the following:

“It is now clear that we must restructure the federal government’s role with regard to insurance oversight,” said Chairman Kanjorski. “At the very least, the federal government must have in-house expertise on this significant sector of the financial services industry and have an ability to watch over insurers as part of broad systemic risk and consumer protection authorities. A federal office, focused on collecting and analyzing insurance information, would provide the minimum role for the federal government in ensuring that insurance is not at a disadvantage as compared to other financial products by helping Congress and the federal government make better decisions regarding insurance policy matters.”

Everybody should be concerned that the insurance industry is using federal laws and regulations to take the rights of policyholders that the states have provided for over a hundred years.

More on this later.

“Whatever the results of these tests, one thing is fairly clear to me: Banks, no matter what size, need to be reined in. They’ve gotten way too big, way too wayward and way too brazen. And all of this was under federal regulation and oversight!

It seems to me that when you get to a certain age you lose faith in panaceas. Federal regulation is not the panacea a lot of folks would like to believe it is or could be.

Those who are looking at tougher federal regulation as a panacea (now that the horse is out of the barn and is dragging our financial system with it) are chasing some kind of pipe dream.

Part of the problem has been that federal regulators, as I’ve pointed out in the past, have been more cheerleaders for their wards than overseers. They enabled the unbridled growth and inordinate amount of risk-taking that brought the system perilously close to collapsing. Has that really changed?

Did I mention before that the one insurer in this group of 19 was judged not to need more capital? Yes, I did.

It makes me think that any federal regulator or agency needs to get some stiff training from their state insurance counterparts so that they can recognize that regulation means strict oversight with regard to solvency and leveraging, not thrusting pom-poms as forcefully as you can, while shouting, “Give me a B, give me an A, an N, a K! Go banks!”

One of my points against federal charter is that federal regulations do not mean efficiency or a better property and casualty insurance system. Indeed, it only takes one regulator to mess it up, whereas fifty state regulators may have a much better chance to notice and correct a problem. The federal banking system failure is proof enough of this point.

Is this a tell-tale indication of the current administration’s stand on federal programs for insurance? The Obama administration reportedly is taking a somewhat quiet but strong stand opposing federal wind insurance legislation that would permit homeowners to purchase wind coverage at actuarially set rates (in addition to the already debt-ridden federal national flood insurance program).

Meanwhile, consumer advocate and former insurance regulator J. Robert Hunter provided congressional testimony that the federal government should take over capital, surplus and solvency regulation of insurance, but should be coupled with removing the antitrust exemption enjoyed by the insurance industry. He also reconfirmed his opposition to a Federal Charter for insurance.

And now Florida’s insurance agents are unsure on which side their bread is buttered the best with SB 1171, the measure before Governor Crist that allows large insurers to raise premiums without the approval of the state regulator. Yesterday, the FAIA (Florida Association of Insurance Agents) declined to take an official position on whether Crist should sign the legislation. Backers of the bill say that it would allow policyholders to retain the familiarity of their insurance company, and that some people would rather “keep a well-capitalized insurer they know and pay a little more for it,” than change insurance companies. Sounds to me a little like the old adage of keeping your friends close but your enemies closer.

Question is, will State Farm leave Florida if the measure isn’t signed by Crist? We’ve just learned that State Farm and Florida insurance regulators have decided to continue negotiating over how the giant insurer can conduct an orderly withdrawal from Florida's property insurance market, rather than proceeding to court.