The business of insurance is a foundational building block of the U.S. economy. As part of the country’s financial history, the regulation of the business of insurance is grounded in a globally unique, state-based regulatory system, which has evolved over time. Generally, this system has served policyholders well, although there are areas such as the consistency and coordination of insurance regulation where improvements can and should be made from a policyholder’s perspective. Increasingly over time, the business of insurance has evolved from primarily a local product offering to, in many cases, a national and international one, with companies adapting their business models to meet the dynamic needs of their customers regardless of where they reside or do business.
As a result, the regulation of insurance also has changed over time as well, with both increased intervention by the federal government and the emergence of global insurance standards for solvency, transparency, and risk management, among other things. This intervention at the national and international levels was accelerated by the recent global financial crisis, which resulted in new national laws and even tougher global standards. Provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)—such as the ability to designate and regulate some large insurance companies as systemically important and the creation of the Federal Insurance Office (FIO) within the Treasury Department—are just two recent examples of the changing nature of the oversight of insurance.
The start of a new presidential administration and a new Congress provides an opportunity to reassess and rethink existing policies, laws, and regulations that impact a vital component of the U.S. economy. There has been too little analysis and policy discussion of insurance regulatory reforms at the state, national, and global levels from the perspective of their impact— individually and collectively—on both policyholders and the economy. This Bipartisan Policy Center paper attempts to fill that void by raising important policy issues regarding the regulation of insurance—a business that touches almost every aspect of U.S. economic activity.
BPC offers the following recommendations to improve the regulation of insurance at the state, national, and global levels to better serve the interests of policyholders and the economy. These recommendations address current issues in state-based regulation, achieving better outcomes for policyholders, existing federal oversight, potential future federal actions if states fail to act, and finally, international insurance regulatory standards.