It is safe to say that there is no moment more dangerous for consumers – and citizens –than one of financial panic when the federal government is moving boldly to respond.
Regulatory frameworks are restructured, rules are rewritten and authority is shifted at lightning speed, with limited or no analysis of what business or special interest in profiteering on fear and uncertainty.
So it comes as no surprise that, as the Bush White House and Democrats leaders of the Congress are hustling to avert a meltdown of American financial systems that even cautious observers are suggesting could be the worst since the Great Depression, insurance-industry lobbyists are working this week to slip a radical rewrite of regulations that currently empower states to protect consumers.
How radical? Imagine purchasing auto insurance over the internet from a Belgian firm that advertises the best prices. Then imagine, after your car is wrecked in a crash, that your calls to Brussels go unanswered. You contact the office of your state insurance commissioner and its consumer protection agency only to learn that they have no authority to sanction the firm. They can’t even warn other families against purchasing insurance from the Belgian company because that might represent an unfair restriction on trade.
That may sound like madness. But is a scenario that consumer protection groups and state insurance commissioners suggest could unfold if a fast-tracked proposal for financial services deregulation that was written to ease if not eliminate essential oversight of multi-national insurance and financial-service firms, the “Insurance Information Act of 2008” (H.R. 5840).
H.R. 5840 would effectively allow the Department of the Treasury to gut state regulation of some of the wealthiest and most powerful corporations in the country in order to assure that the U.S. complies with international agreements regarding insurance policy.
The bottom line with regard to this legislation, behind which the insurance industry has thrown all of its lobbying muscle, is summed up by one of the savviest of the state regulators, Wisconsin Insurance Commissioner Sean Dilwig. “(H.R. 5480) creates an unaccountable federal process that produces deregulation of the insurance industry to the detriment of consumers,” says Dilwig.
Were H.R. 5840 to be enacted, state insurance commissioners – who have in recent years done a far better job than their federal counterparts of protecting consumers from the excesses of insurance companies that now fancy themselves to be “financial services” firms – would be disempowered. Tough state regulations would be gutted. Policing units would be told to go easy on consumer protection in order to assure that foreign firms that want to get into lucrative U.S. insurance markets — and the managers of international trade agreements who advocate on their behalf – are satisfied.