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Wednesday, June 15, 2005

Pressures for federal regulation of American insurance companies

Joseph B. Treaster, "Coalition Seeks a Federal Insurance Regulator," New York Times (natl. ed.), 15 June 2005, C5.

Here's an(other) instance of business pressure for federal in place of state regulation. Business interests (at least the big players) seem fairly united behind the initiative to create "an efficient, uniform regulatory structure" nationwide in place of the usual "patchwork" or "mosaic" of regulation by 50 states (the article doesn't use the latter terms but they are typically used by critics of state regulation). The proposed solution is to give companies the option to be regulated by Washington or their home state. Critics suspect that insurers and bankers see federal regulation -- in the current political environment in Washington -- as a means of deregulation. "'If the federal government was a little less laissez-faire, the insurers and banks wouldn't be doing this,' said J. Robert Hunter, insurance director at the Consumer Federation of America."

The American practice of leaving incorporation policy and broad areas of regulation (insurance, banking) to the state governments seems increasingly anachronistic in an age of globalization. But in many ways it serves effectively to minimize regulation because the state governments have encountered serious legal-structural or political obstacles to regulation since the 1850s.

Background reading on insurance: Peter J. Wallison, ed., Optional Federal Chartering and Regulation of Insurance Companies (Washington, D.C.: The AEI Press, 2000).

Well, so much for my effort to write expediently!

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