The insurance lobby, one of the most powerful special interest forces in the United States, has launched an all-out campaign to emasculate the nation's already weak insurance regulatory framework. If the insurance lobby gets its way, it will be much easier for insurers to raise your rates, cut your coverage, and use deceptive sales methods. The industry's campaign for deregulation follows the passage of the Gramm-Leach-Bliley Act (GLBA), which allows insurers, banks, and securities firms to merge into the money trusts of the past. The insurance lobby perversely calls this process "financial services modernization."
There is, however, nothing modern about the GLBA. The act is a piece of special interest legislation that repealed New Deal reform legislation that kept financial sectors such as banking, insurance, and securities separate because the combined economic and political power of these industries threatened to undermine competitive enterprise and democratic government.
The passage of the GLBA has spurred consumer groups to redouble their efforts to strengthen the insurance regulatory system and reject insurance industry demands to weaken the already inadequate consumer safeguards in the insurance marketplace. Consumer advocates are also concerned about the misuse of political and economic power that is likely to come with further consolidation of financial services.
On Sept. 10, J. Robert Hunter, the Consumer Federation of America's director of insurance, led a coalition of consumer advocates in calling for public interest-oriented insurance regulatory reform. The consumer coalition released a white paper that provides specific guidance to public officials with regard to reinventing insurance regulation to benefit consumers. The paper listed 70 pro-consumer principles by which the public can judge whether the changes being proposed meet consumer needs. These principles fall into eight broad categories: timely and meaningful disclosures for consumers; user-friendly design of policies; access to adequate coverage; nondiscriminatory marketplace; privacy protection; meaningful right of redress; competent regulatory structure; and consumer representation in all processes.
The AFL-CIO and Consumers Union, among others, have endorsed the white paper, and the American Association of Retired Persons (AARP) has issued a similar list of principles by which to measure the changes being proposed. Hunter has succeeded in building a strong coalition, but he has a tough battle to fight. The insurance lobby has picked a battleground that is inaccessible to most consumer advocates and concerned citizens. Rather than debating the merits of deregulation in Congress or the state capitals nationwide, the insurance lobby has taken its plans to two private forums: the National Association of Insurance Commissioners and the National Conference of Insurance Legislators. The NAIC, an association of state regulators, is heavily influenced by the insurance industry. The NCOIL membership consists of state legislators who often side with the insurance industry in state legislatures.
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The NAIC and NCOIL are cozy clubs where insurance lobbyists and the public officials they control meet without being bothered by the inefficiencies of democratic government. Both organizations like to hold their meetings in high-class hotels. State officials can afford to be there because their expenses are subsidized, or paid for outright, by the insurance lobbyists' attendance fees. Hospitality suites abound for the regulators. And, there is no shortage of insurance industry lobbyists wanting to treat the regulators to fine dinners.
Insurance reform has never come easy. Usually, reform has only followed financial failure. The financial panic of 1907 resulted in the Armstrong and Merritt committees in New York. The lingering effects of the Great Depression resulted in the Temporary National Economic Committee investigation. A series of great antitrust cases initiated by Thurman Arnold following the TNEC investigation nearly succeeded in forcing insurers to comply with the same consumer protections as other national businesses.
There have been victories in the fight for insurance reform, such as the 1988 landmark pro-consumer ballot initiative in California. Consumers voted to reject excessive auto, homeowner, and business insurance premiums and curb a variety of abuses by insurance companies in California.
Unfortunately, insurers are shielded from federal antitrust law and Federal Trade Commission oversight because state officials promised, in 1945, to replicate these consumer protections at the state level. Unrelenting pressure from insurance lobbyists has prevented the states from producing meaningful pro-consumer insurance regulation. We should not wait for another Great Depression to bring insurance under the same regulatory framework as other sectors of interstate commerce. Fair and reasonably priced insurance is important for economic growth and security. Consumers beware! The insurance industry campaign for insurance deregulation is primarily designed to benefit the insurers, not consumers.
For more information about this issue, write to Robert Hunter, Consumer Federation of America, 1424 16th St., NW, Suite 604, Washington, D.C. 20036.