June 25, 2009 - 6:42am
Life insurers and banks criticized the administration’s proposal for a Consumer Financial Protection Agency at a House Financial Services Committee hearing. The Obama plan calls for an Office of National Insurance within the Department of the Treasury, to gather information and coordinate policy development concerning insurance, but it would not have regulatory power.
As Gary Hughes, vice-president and general counsel of American Council of Life Insurers Executive of Washington, said in prepared testimony at the hearing, there is no evidence that life insurance products contributed to the present crisis, and the lack of a federal regulator over the life insurance industry means a consumer regulator would not have comprehensive understanding of underwriting necessary to oversee carriers. Unless a federal regulatory body is given authority to regulate insurers for solvency, the role of any federal body should only be advisory.
“Divorcing the regulation of our products from the rest of life insurance solvency oversight would result in weakening consumer protections and jeopardizing the solvency of life insurers, particularly in light of the fact that the requisite expertise to deal effectively with life insurance products is absent at the federal level,” Hughes said.
Meantime as we know life insurers and other insurance companies have long entreated Congress to give them the option of being federally regulated. However, the Obama financial service regulatory reform plan does not include that option.
If Congress creates the CFPA, banks, especially community banks, would face a “potentially massive new regulatory burden”, said Edward Yingling, president and chief executive of the American Bankers Association in Washington.
However, congressional consultant and prominent academic Elizabeth Warren, who first proposed the idea of the consumer financial protection agency, argued that the CFPA would reduce systemic risk by restricting or deprive risky consumer products, such as high-risk high-profit loans, of legal force and would help develop simplified mortgages, credit cards and car loans.
As Gary Hughes, vice-president and general counsel of American Council of Life Insurers Executive of Washington, said in prepared testimony at the hearing, there is no evidence that life insurance products contributed to the present crisis, and the lack of a federal regulator over the life insurance industry means a consumer regulator would not have comprehensive understanding of underwriting necessary to oversee carriers. Unless a federal regulatory body is given authority to regulate insurers for solvency, the role of any federal body should only be advisory.
“Divorcing the regulation of our products from the rest of life insurance solvency oversight would result in weakening consumer protections and jeopardizing the solvency of life insurers, particularly in light of the fact that the requisite expertise to deal effectively with life insurance products is absent at the federal level,” Hughes said.
Meantime as we know life insurers and other insurance companies have long entreated Congress to give them the option of being federally regulated. However, the Obama financial service regulatory reform plan does not include that option.
If Congress creates the CFPA, banks, especially community banks, would face a “potentially massive new regulatory burden”, said Edward Yingling, president and chief executive of the American Bankers Association in Washington.
However, congressional consultant and prominent academic Elizabeth Warren, who first proposed the idea of the consumer financial protection agency, argued that the CFPA would reduce systemic risk by restricting or deprive risky consumer products, such as high-risk high-profit loans, of legal force and would help develop simplified mortgages, credit cards and car loans.