Agents Tell Treasury Financial Regulation Study Questions Biased

November 15, 2007

A notice published in the Federal Register seeking comments for a broad Treasury Department review of financial regulation is biased in favor of federal regulation of insurance and foreign business entities, according to the National Association of Professional Insurance Agents (PIA).

The specifics of the published notice “raise critical concerns about the direction, purpose and intent of the review process itself, concerns we are compelled to address directly to you at this time,” stated PIA in a Nov. 14 letter to Treasury Secretary Henry Paulson.

PIA said the notice in the Federal Register poses a series of “loaded questions” designed to encourage predetermined responses.

“No attempt is made to disguise the clear bias of these questions,” noted PIA Executive Vice President & CEO Leonard C. Brevik. “For example, three questions that specifically relate to insurance all attempt to elicit comments supportive of federal regulation of insurance. This survey clearly lacks objectivity and is slanted toward expanding federal regulation of insurance.”

The PIA letter also said there “is an apparent prejudice in favor of redesigning United States regulatory structures to make it easier for foreign insurance entities to compete with American insurance companies in the United States.”

“PIA is concerned that the Treasury Department has presented itself and its agenda through this Notice as already prejudiced in favor of changing the U.S. marketplace in order to accommodate foreign competitors,” commented PIA Senior Vice President Patricia A. Borowski. “We are also concerned by the apparent assumption that the best way to successfully compete is to abandon our own regulatory structures and replace them with those adopted by the European Union, or individual foreign nations.”

Borowski noted that PIA opposes efforts to compromise U.S. standards “in order to attract new alien entities who want things to be done their way to make it easier for them, not for the betterment of our U.S. carriers providing insurance domestically in the United States, or for U.S. insureds.”

In addition, PIA noted that questions relating to European systems of “principles-based” regulation seem slanted toward adoption of that concept by the United States as an alternative to our current “rules-based” regulatory systems. A “principles-based” system is one that states broad objectives to companies and then puts the onus on them to meet the objectives. A “rules-based” regulatory system like those the United States uses relies on stating specific requirements, or prohibiting certain actions by law.

“While principles-based regulation may be fine for a small country with limited competitors somewhere in the middle of Europe, the U.S. is the center of the free enterprise system with 300 million people, $1.1 trillion dollars of insurance premium volume representing one-third of the world insurance market and thousands of insurance companies,” Brevik said. “We simply cannot support Treasury throwing out the rules just to bring the Europeans in and put American insurance consumers out.”

PIA supports continued state regulation and oversight of insurance, not industry-managed self-regulation.

“We regret that the substance, tone and underlying assumptions contained in this Notice in the Federal Register lead us to conclude that the Treasury Department may have already made up its mind regarding the recommendations that it will make at the conclusion of this review process, an observation that we do not make lightly,” the PIA letter to Secretary Paulson concludes. “We believe this will ultimately serve to undermine the validity of this review, compromise its effectiveness and detract from, rather than advance, your goal of increasing competitiveness.”

To read a copy of the PIA letter sent to Secretary Paulson, U.S. Treasury, visit:

To view the Federal Register notice of Oct. 11, 2007, visit:

Source: PIA

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