/PRNewswire/ -- Consumer Watchdog called on Congress to reject legislation allowing the Treasury Department to use international agreements to override state insurance laws, including those requiring insurers to hold enough money to pay all claims. The proposal is under consideration in the U.S. House Financial Services Committee today.
"State insurance regulators made sure that insurance companies had enough money in the bank to pay policyholder claims and weather the financial storm. Congress should not give a political appointee the power to take away that authority on behalf of foreign insurance companies," said Carmen Balber, Washington Director for Consumer Watchdog. "This bill promotes insurance deregulation as Congress should be strengthening financial service sector regulation."
Download Consumer Watchdog's letter with Public Citizen and US PIRG here: http://www.consumerwatchdog.org/resources/FedInsOfc10-6-09.pdf
The proposal, a discussion draft amending H.R. 2609 offered by Rep. Kanjorski, would give the Treasury Secretary unilateral new authority to negotiate international insurance agreements on prudential issues, determine if state insurance laws are "inconsistent" with such an agreement, and then preempt those state laws. Safeguards intended to exempt specific state insurance laws from preemption do not go far enough to protect important consumer protections, wrote the groups.
The letter reads: "Never before has the U.S. government allowed a federal agency to unilaterally interpret or enter into international agreements on subject matter under the authority of the legislative branch, and then preempt states through rule-making on the basis that state policies are in contradiction to those agreements."
Consumer Watchdog also objected to the lack of consumer representation on the Financial Services witness panel today.
Rep. Kanjorski offered similar legislation last year, which was pulled back in the wake of AIG's dramatic collapse.
Download Consumer Watchdog's letter opposing last year's legislation here: http://www.consumerwatchdog.org/resources/HR5840.pdf
Download last year's letter from Public Citizen and US PIRG: http://www.consumerwatchdog.org/resources/HR-5840-letter-Consumer.pdf
The groups supported efforts to develop greater federal information and expertise in insurance but noted that the proposed legislation goes far beyond information gathering.
In California, where voters enacted the nation's toughest system of insurance regulation with Proposition 103, consumers are protected from unfair or excessive insurance rates, illegal surcharges and other abusive and discriminatory practices. Any move to federalize insurance regulation would jeopardize these consumer protections, said Consumer Watchdog.
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