WASHINGTON, D.C., March 17, 2009 - The Independent Insurance Agents & Brokers of America (the Big "I"), testified today before the U.S. Senate Banking Committee in a hearing titled, “Perspectives on Modernizing Insurance Regulation.”
Spencer M. Houldin, an independent agent from Connecticut, chairman of the IIABA government affairs committee, and the Connecticut representative on the IIABA Board of Directors, testified on insurance regulatory modernization on behalf of the association.
Houldin testified that “[w]e must carefully examine the causes of the current crisis, and determine how or if regulatory policy should change to ensure we do not repeat the mistakes of the past. It
is a daunting task, and as a small businessman who must conduct business in the regulatory environment of the future, I implore policymakers to act judiciously and make sure that when you act, you get it right.”
“While IIABA is committed to helping improve the system, it is worth noting that relative to other segments of the financial services industry, the property-casualty insurance market has remained solid and vibrant,” said Houldin. “In short, the property-casualty insurance industry continues to operate without the need for the federal government to step in to provide any type of support.”
Houldin emphasized that the current state regulation system is working, although it could use some targeted reforms.
“[A]s we undertake a review of current regulations in place and consider strengthening existing laws or adding additional ones, we must ensure that we do not simply toss out regulatory systems that work in an effort essentially to wipe the slate clean and start over,” said Houldin. “…[I]t should not be overlooked that the state system has an inherent consumer-protection advantage in that there are multiple regulators overseeing an entity and its products, allowing others to notice and rectify potential regulatory mistakes or gaps. Providing one regulator with all of these responsibilities, consolidating regulatory risk and essentially going against the very nature of insurance of spreading risk, could lead to more substantial problems where errors of that one regulator lead to extensive problems throughout the entire market.”
IIABA has long asserted that the best method for addressing regulatory deficiencies is by enacting targeted legislation or federal legislative ‘tools’ that establish greater interstate consistency and streamline redundant oversight, not an optional federal charter (OFC), which would result in regulatory arbitrage by allowing companies to pick and choose a regulatory system. The use of targeted and limited federal legislation on an as-needed basis can improve rather than dismantle the current state-based system and in the process produce a more efficient and effective regulatory framework.
In conclusion, Houldin emphasized that “IIABA believes that, with the exception of a properly crafted systemic risk overseer at the federal level, targeted modernization is the prudent course of action for reform of insurance regulation. Therefore, any efforts to use this crisis and the failure of AIG as an opportunity to promote misguided measures that would allow a regulated insurance entity to choose its own regulator should be summarily dismissed as unacceptable in today’s financial environment.”
Houldin is also president of Ericson Insurance, a Connecticut-based independent agency that offers a broad array of insurance products to consumers and commercial clients across the country.
Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, health, employee benefit plans and retirement products. Web address: www.independentagent.com.