In a letter to Treasury Secretary Timothy Geithner and Director of the National Economic Council Lawrence Summers, Robert Rusbuldt, president & CEO of the Independent Insurance Agents & Brokers of America (IIABA) warned that an optional federal charter (OFC) for insurance would imperil the stability of the state-based system of regulation,
“While the insurance business would unquestionably benefit from greater efficiency and uniformity in certain key areas of regulation, we ask that you be extremely cautious in the consideration of wholesale changes that could have an unnecessarily disruptive effect on the market and consumers,” Rusbuldt wrote.
Rusbuldt accused OFC proponents of exploiting the financial crisis to push reform and said establishing a system with multiple regulators will enable companies to choose the most pliant one.
“Unfortunately, some in the insurance industry believe that now is the time to pursue deregulatory proposals and to establish a new and untested functional federal regulator for insurance,” the letter states. “The establishment of an OFC system will result in regulatory arbitrage, with companies choosing how and where they are regulated thereby pitting one regulatory system against the other in a race to the bottom. This regulatory cherry-picking does not occur in the insurance market today because the state system does not allow for companies and agencies to apply less stringent day-to-day consumer protection laws of their home state to other states where they conduct business.”
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