State-based regulation of insurance has been a bedrock of the industry and effectively protects the interests of consumers. Federal law, including Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, recognizes this fact and explicitly exempts the business of insurance from regulation by federal Bureau of Consumer Financial Protection (BCFP).
NAIFA and a coalition of groups representing a majority of the U.S. companies and agents offering property-casualty, title, and life insurance have asked Congress for additional legislation that would clarify provisions in Dodd-Frank and solidify the state-based system of insurance regulation.
The legislation would more clearly define the broad scope of the insurance business, spell out the limits of the BCFP’s regulatory authority, and solidify the authority of state insurance officials to regulate the industry. According to a letter NAIFA and the other groups sent to Senators Tim Scott (R-SC), Joe Manchin (D-WV), and Representative Bryan Steil (R-WI), “this key legislation will create certainty for insurers, agents, and consumers that there will not be duplicative or conflicting consumer protection regulations in the future.”
NAIFA is a strong proponent of state-based insurance regulation. State insurance commissions understand the diverse needs of consumers in their jurisdictions and can promote innovation within the industry to meet these needs. State-based regulation avoids the pitfalls of a one-size-fits-all approach that would certainly emerge in federal oversight of the industry. State regulators also may be more nimble and able to react to changes within the industry more quickly than the federal government. Intrastate organizations like the National Association of Insurance Commissioners (NAIC) and National Council of Insurance Legislators (NCOIL) provide model laws and regulations that promote consistency across the country when appropriate.