According to Wikipedia, the first insurance company to operate in the United States was in Charleston, South Carolina in 1735. Benjamin Franklin helped found the first mutual insurance company to operate in the United States in 1752 and that company — Philadelphia Contributionship — is still in operation today some 265 years later. Like the first in the nation, Franklin’s company focused on fire and made contributions toward fire prevention. It warned against some hazards and refused to insure some buildings that were a fire hazard like those made of wood.
The first insurance company in the country to sell stock in itself was the Insurance Company of North America. It was formed in 1792.
When it comes to laws governing insurance, Massachusetts was the first to implement insurance regulations. In 1837, the state said insurance companies must maintain adequate reserves. The first state insurance commissioner was appointed — and states began to get serious about insurance regulation — in New Hampshire in 1851. New York followed in 1859 and one-upped New Hampshire by creating a state department of insurance.
That moved the comprehensive regulation of insurance to the state level.
Since then — as you know — the regulation of insurance has grown. Up until the 1950s insurance companies — for the most part — could only sell one line of insurance. Since then insurance has grown from small, local, single-line mutual companies to multi-line and multi-national conglomerates and holding companies.
Regulation was given to the states — formally — in 1945. A year before the U.S. Supreme Court declared insurance subject to federal jurisdiction under the Commerce Clause of the Constitution. An almost immediate response to that by Congress was the McCarran-Ferguson Act in 1945. It specifically declared insurance the province of the individual states and said it is in the public interest for it to be that way.
McCarran-Ferguson also said no federal law can be passed to invalidate, impair or supersede any law enacted by a state government. That’s one reason PIA National has adamantly been against the current Federal Insurance Office and its attempt to take over some parts of the regulation of insurance. It is also why PIA National now opposes work the U.S. House of Representatives is doing on the reauthorization of the National Flood Insurance Program (NFIP).
The renewal effort includes a bill called the Financial Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs — or CHOICE — Act. It creates an Office of the Independent Insurance Advocate and places it — as the FIO is — within the U.S. Treasury and it expands the powers of the FIO.
PIA National Executive Vice President Mike Becker said, “This provision of the Financial Choice Act runs completely counter to the intent of Dodd-Frank reform by creating a new, expansive and unnecessary federal insurance bureaucracy with the potential to grow. The Independent Insurance Advocate could lead to a federal insurance czar with no supervision, who would be positioned to usurp our strong and effective system of state insurance regulation.”
As you just read, since the founding of this country the state-based system of regulation has worked and has successfully protected consumers and created a competitive market for them.
“Congress has a mandate to rein in federal bureaucracies — not create new ones. We call on lawmakers to remove this provision from the Financial CHOICE Act. PIA opposes the creation of an Office of the Independent Insurance Advocate,” Becker said.
PIA National’s attitude is similar to that of the National Association of Insurance Commissioners (NAIC) who has also opposed the FIO and now the Independent Insurance Advocate. Both — the two organizations say — need to be done away with.
Jon Gentile — who is PIA National’s vice president of government relations — said the new office has its own budget and can hire employees like attorneys, economists and analysts. The Treasury Secretary has little or no jurisdiction over the decisions made by this advocate to delay or prevent the issuance of any rule or the promulgation of any regulation by the Independent Insurance Advocate.
“We are struck by how powerful this position would be. This office could potentially grow in a manner that would lead to a federal regulatory bureaucracy,” Gentile said.