We are discussing insurance regulation in the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The federal government has traditionally not had a lot to do with the day-to-day operation of the insurance industry, thanks in part to the McCarran-Ferguson Act of 1945. But Dodd-Frank established something called the Federal Insurance Office, and insurance companies, state regulators and consumers alike are wondering what exactly the agency's role is.
Dodd-Frank established the FIO in part to monitor all aspects of the insurance industry. That includes monitoring consumers' access to affordable insurance of all types, not just health insurance. The agency is to concentrate in particular on consumers in underserved communities. The emphasis for us, of course, is on the word "monitor." The FIO is not a regulatory body. Again, that power remains with the states, in Florida's case with the Office of Insurance Regulation.
The FIO is expected to make recommendations about how insurance companies and the industry as a whole can better serve consumers. This is the information that will be covered in the long-awaited and long overdue "modernization report." However, those recommendations are recommendations alone, not proposed laws.
To ensure that the FIO could gather the appropriate information for the modernization report, the act gave the agency authority to demand information from the industry. That power even extends to subpoenas -- as a last ditch effort, should the information not be available anywhere else.
Right now, insurance companies serve many masters -- one for every state they do business in. When the FIO first came into being, there were concerns that insurers would work hard to comply with state regulations only to have the FIO come in to preempt the state law with a federal directive.
It could happen, but under very, very limited circumstances. We'll explain more in our next post.
Source: Carrier Management, "Myths About The Federal Insurance Office," Michael R. Nelson and Lawrence H. Mirel, July 10, 2013