Greg Bloomfield is the president of Wood River Insurance and the incoming president of the Independent Insurance Agents and Brokers of Idaho.
By GREG BLOOMFIELD
The financial crisis gripping the country has many Idahoans on edge, and it may take months or years before true stability is restored. But, just when you think you have heard everything, some of the country's largest financial institutions are actually suggesting that the answer to these problems is sweeping deregulation and a federal takeover of the insurance marketplace.
This is not a new idea. For more than a decade, many of the country's biggest insurance companies have surreptitiously yet aggressively lobbied Congress for the ability to decide whether to be regulated by state officials or by some newly created federal agency. The efforts of these insurance lobbyists have so far fallen on deaf ears, but they received a surprising boost recently when Rep. Walt Minnick quietly threw his support behind their proposal. One has to wonder exactly what Congressman Minnick is thinking.
It would be a monumental mistake to transfer regulatory authority of the insurance business over to the federal government. For one thing, look at the track record of federal agencies when it comes to oversight of financial services. The commercial banks, investment firms, and international holding companies (like AIG) at the center of the financial crisis were all regulated by institutions of the federal government—and taxpayers are now picking up the tab for their oversights and failures. The savings and loan mess of the 1980s, which cost billions to clean up, also occurred on the watch of Congress and a similar federal bureaucracy.
In contrast, most elements of the insurance industry are regulated today at the local level by Idaho officials, and they do an excellent job. At a time when crisis and turmoil are the norm in the banking and securities sectors, state insurance regulators in Idaho and elsewhere continue to quietly and effectively ensure that insurers are solvent, that claims are paid, and that consumers are protected. State officials have decades of experience, handle countless inquiries and questions from consumers, and understand the concerns and particular issues facing the citizens of our region. State oversight of insurance may not be perfect, but its record is far superior to that of the financial regulators at the federal level.
Those calling for a new federal oversight system for insurance (known as "optional federal chartering") would actually allow insurance companies themselves to choose between federal and state regulation while in the process creating a highly deregulated option at the federal level. The advocates of such a system are the very entities that would opt for federal oversight. They assume they would have regulators as lax and deficient as those that today oversee commercial banks and securities firms. Big out-of-state firms might benefit from such legislation, but Idaho consumers would be losers if the radical "solution" supported by Rep. Minnick were ever implemented.
The only people calling for federal oversight of the insurance industry are the big insurance players who desire the same level of weak oversight, lax accountability, and flimsy consumer protection that produced the current crisis. While the halls of Congress are filled with officials who put politics before public policy, let's hope that Congressman Minnick will reconsider his decision to support this bad idea and instead put the interests of Idaho citizens, policyholders and businesses ahead of the self-serving desires of big insurance companies.