Washington, D.C. — Congress should reject any proposal that would deregulate insurance or otherwise override state insurance laws that have successfully protected consumers during the current economic crisis, said the nonprofit Consumer Watchdog today in advance of an insurance hearing in the U.S. Senate Committee on Banking, Housing and Urban Affairs.
 
“State insurance oversight has kept insurance companies stable and protected policyholders from the worst of the financial meltdown, even as banks and investment firms failed under federal regulation,” said Carmen Balber, Washington Director for Consumer Watchdog. “The successes of state insurance regulation should be a model for federal financial reform, not invite Congress to usurp authority in the one place where regulation gave consumers some security in this economic crisis.”
 
Proposals for federal intervention in insurance markets include an “optional federal charter” in which insurance companies could choose to opt-out of state regulation and select instead a federal overseer. Other proposals would impose federal authority over various aspects of insurance markets. Allowing insurers to select which standards to follow, or preempting those standards entirely, will negate hard-won consumer rights laws and destroy the state-based oversight that kept insurance products and companies safe during the financial meltdown, said Consumer Watchdog.
 
In California, where voters enacted the nation’s toughest system of insurance regulation with Proposition 103, consumers are protected from unfair or excessive insurance rates, illegal surcharges and other abusive and discriminatory practices. Any move to federalize insurance regulation would jeopardize these consumer protections, said Consumer Watchdog.
 
An April 2008 state-by-state study of auto insurance regulation, by the Consumer Federation of America, found that California’s law limiting the rates insurers can charge has saved motorists $62 billion since Proposition 103’s passage.  The Federation named California both one of the most competitive and one of the most profitable markets in the country, with the slowest-growing automobile insurance premiums in the nation. All these gains could be lost for consumers if federal standards override state rules.
 
“Responsible state oversight of the auto insurance industry saved consumers billions while California auto insurers remained one of the most competitive in the nation. Such success should be copied – not crushed. Federal interference in insurance markets would allow the policies that sank banks and investment firms to devastate our state-based insurance protections,” said Balber.
 
Read Consumer Watchdog’s letter to Treasury Secretary Geithner last month opposing federal intervention in insurance regulation.
 
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