The federal government must take action to fix “critical problems in the insurance marketplace that Congress cannot continue to ignore,” U.S. Rep. Michael G. Oxley said today.

The health insurance marketplace is “collapsing,” parts of the property-casualty marketplace are “similarly fraying around the edges,” and insurance market problems are “getting worse” in most states, Oxley, chairman of the House Financial Services Committee, warned.

“Insurers are facing increasing competition from other financial services sectors which have significantly lower regulatory costs. Loss pressures are increasing with terrorist threats, mold, natural disasters, etc. And many economists and re-insurers are warning us of increasing volatility in the years to come,” he said today in a speech to the National Association of Insurance Commissioners in New York.

State insurance regulations aim to protect the interests of people who purchase homeowner’s insurance and other types of insurance policies. Homeowners in recent years have paid significantly higher premiums for property-casualty insurance, which has become more difficult to obtain in many markets.

The federal government won’t establish a federal-level insurance regulatory agency or an optional federal charter for insurance companies, but new federal regulations that would create greater uniformity among state-level insurance marketplaces are necessary, Oxley said.

“If Congress doesn’t move toward reasonable reforms now in a controlled environment, when the next inevitable scandal occurs, Congressional inaction could quickly turn into overreaction, risking an excessive Federal response that we will all later regret,” he warned the state insurance commissioners.

Oxley identified six “critical weaknesses” in the current insurance regulatory structure that he said need to be addressed. Regulators need to review new insurance products more efficiently and effectively; achieve uniformity and universal state reciprocity in agent licensing; streamline company licensing; coordinate and improve oversight of insurers’ market conduct; address the “travesty of price controls” that reduce competition and consumer choice, and improve the “federal-state partnership to coordinate insurance policy and promote uniformity,” he said.

Oxley and Rep. Richard H. Baker have developed an initial “roadmap” for federal action on insurance issues. Baker is chairman of the financial services committee’s capital markets and insurance subcommittee, which has held 14 hearings in the last three years on the strengths and weaknesses of the insurance regulatory system.

The roadmap would ensure that all types of insurance were as widely available as possible throughout the country, give consumers as many competitive and meaningful insurance choices as possible, work with state regulators to create a uniform system to protect consumers from fraud, improve the efficiency and effectiveness of the state-based regulatory system and foster expanded insurance capacity and coverage availability, according to a statement from Oxley’s office.

A proposed federal-state insurance advisory council would coordinate discussions about insurance tax policy and federal-state uniformity. Oxley said that the council would be run by state insurance commissioners and federal entities involved with national insurance and that “some sort of national coordinator” will be necessary to ensure the reforms are implemented. A federal individual appointee, “who will have no authority other than to stamp no or yes on the recommendations of the advisory council” also may be necessary.

“There are many opinions on these issues. What Mr. Baker and I will be offering is a middle ground approach that is probably the only opportunity for consensus and achievable state-based reform,” Oxley told the state insurance commissions.


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