September 28, 2010
The person appointed to lead a new federal office will play a huge role in shaping the future of insurance industry regulation, said a professor with Indiana State University's Scott College of Business.
The Federal Insurance Office, which was created in the Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress earlier this year, does not yet have a director. The office also does not yet have its powers explicitly spelled out, said Terrie Troxel, a professor and executive director of Networks Financial Institute (NFI) at ISU. Discussion regarding the new office took place during an NFI-sponsored conference in Indianapolis earlier this month, which focused on the Wall Street reform act's regional impact on the insurance industry.
State regulators and insurance industry representatives attending the NFI conference agreed whoever is appointed to head the new office "will have a big influence on the political philosophy and the trajectory of what that office will do," said Troxel, who also worked in the insurance industry.
So regulators and industry officials are "going to be very sensitive to that appointment," he added.
The insurance industry is principally regulated at the state level. While some parts of the industry would welcome a federal regulator, Troxel noted that "nobody wants dual regulation."
"They don't want to be regulated both at the state level and the federal government level," he said.
The Dodd-Frank Act requires the Federal Insurance Office to report on communities that have difficulty gaining access to insurance, which Troxel said has led to some concern over price regulation.
"There is nothing directly in this act that would allow the federal government to be involved in prices," he added, but because the data collection and reporting is required, "people fear that is a first step towards dual regulation of pricing at both the state and federal level."
The office will have data collection responsibilities, and the insurance industry doesn't want to have multiple reporting requirements that can be costly, Troxel noted, though he added that the federal office will first have to look to state regulators for data they have already collected.
Troxel said it is unlikely somebody would be appointed director of the Federal Insurance Office before the November elections.
Therese Vaughan, the chief executive officer of the National Association of Insurance Commissioners who gave the keynote speech at the conference, addressed the new federal office. She said that, among other things, the office will identify institutions that require enhanced supervision and develop federal policy on key aspects of international insurance.
She said that the approach planned for the office "allows the state system to fit into an increasingly global market."
"My hope is that we take the best of the state regulatory system and partner it with a federal body that has the power to make regulations work," she told the audience.
Other issues were discussed at the conference, which included a panel of insurance regulators from Indiana, Illinois and Michigan. Members of the insurance industry also had a panel discussion.
About 60 people attended the event. Some people attending the conference wanted to hear more from several of the speakers, Troxel said. He noted that the event was well-received.
"We were kind of amused by the fact that the one negative comment we got was that it wasn't long enough," Troxel said as he chuckled, "and we thought we wore them out."
Contact: Terrie Troxel, executive director, Networks Financial Institute, Indiana State University, 812-237-2028 or firstname.lastname@example.org
Writer: Austin Arceo, assistant director of media relations, Indiana State University, 812-237-3790 or email@example.com
Professor says first leader will influence the role of the new Federal Insurance Office.