Insurance Industry and Consumer Groups Split on Proposed Reforms

The Bush administration's proposal to create a federal insurance regulator and then to allow insurers to chose whether they would be regulated by the states or by the federal office has consumer groups irate and has garnered some support from the insurance industry. Supporters of the plan include some major insurers and the American Insurance Association and the Risk and Insurance Management Society. Opponents include the Independent Insurance Agents & Brokers of America, consumer groups, and the Professional Insurance Agents of America.

Opponents of the proposed reforms argue the reforms are actually a give away to large national insurers and the equivalent of deregulation. Proponents (mostly big insurer organizations) argue that it allows the insurance industry to be more competitive in a global economy. Some argue that the proposals are the same as the Insurance Reform Act of 2007 proposed in Congress last year with the support of some of the same critics now.

One thing is clear. There is no mention of health care insurance in the administration's proposal. In the 2007 legislation proposed in Congress, health care insurers were specifically excluded from the proposal.

On balance, this proposed regulation does indeed seem like deregulation. If you have read my posts here, you know about the ongoing battle between Allstate and the State of Florida. If the administration's proposals were adopted, I would imagine that Allstate would "choose" to be regulated by Washington rather than the State of Florida. This begs the question of whether the public is better served by zealous state administrators on the ground or by federal regulators. Finally, if this is a needed regulatory reform, then why is this reform not needed in the health insurance industry?

What are your thoughts? I would love to see your comments.