Could life insurance wind up being regulated by federal government?
The federal government eventually could be the primary regulator of life insurance and annuities across the United States, according to a report from a nonprofit think tank for the financial services industry.
The report, issued by the Networks Financial Institute at Indiana State University’s Scott Business College, says it’s “conceivable” that life insurance and annuities could switch from state-by-state regulation to federal regulation, while states would continue to regulate health, auto and home insurance. Federal oversight would increase the efficiency of life insurance and annuity regulation, the report says.
Fifty-three percent of Americans were covered by some type of life insurance in 2010, according to LIMRA, a trade group for insurance and financial services companies.
An annuity is a contract between you and an insurance company that is designed to meet retirement goals and other long-range investment targets, according to the U.S. Securities and Exchange Commission. Through an annuity, you make a lump-sum payment or series of payments. In return, the insurer agrees to start making periodic payments to you immediately or at some point in the future.
The institute’s report is designed to provide insight for the newly established Federal Insurance Office. As the report points out, the office serves as “the federal government’s eyes and ears in the insurance sector.” However, under its current setup, the office wields no regulatory power. Congress would have to approve any changes in the office’s ability to regulate insurers.
The Federal Insurance Office, led by former Illinois insurance regulator Michael McRaith, was created under the federal Wall Street reform law.
The American Life Insurance Council, a trade group for the life insurance industry, declines to comment on the institute’s report.