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Federal Chartering of Insurance Companies: Options and Alternatives for Transforming Insurance Regulation

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  • Scott Harrington

Abstract

This paper provides an overview of the rationale and options for federal intervention in insurance regulation. Despite a number of positive and incremental reforms throughout the past decade, several key aspects of state insurance regulation, including regulation of rates, rate classification, and policy forms, remain substantially dysfunctional in many states – with no end in sight and with significant burdens on interstate commerce. A transformation of insurance regulation to reduce those burdens by promoting healthy price and product competition and eliminating regulatory micromanagement of price and product decisions will not be achieved without federal intervention. A well-designed system of optional federal chartering and regulation represents one means for attempting to achieve such a transformation. Two alternatives for transforming insurance regulation without creating a federal regulator and perhaps with less risk than optional federal chartering include: (1) enact minimum federal standards for state insurance regulation that would preempt non-conforming state regulation, and (2) allow life, health, and property/casualty insurers to designate a 'primary state,' and to operate nationwide subject primarily to the regulations of that state.

Suggested Citation

  • Scott Harrington, 2006. "Federal Chartering of Insurance Companies: Options and Alternatives for Transforming Insurance Regulation," NFI Policy Briefs 2006-PB-02, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfipbs:2006-pb-02
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    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2006-PB-02_Harrington.pdf
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    Cited by:

    1. Martin F. Grace, 2009. "A Reexamination of Federal Regulation of the Insurance Industry," NFI Policy Briefs 2009-PB-02, Indiana State University, Scott College of Business, Networks Financial Institute.
    2. Martha Henn McCormick, 2008. "Selected Research on Insurance Regulatory Reform: A Descriptive Bibliography," NFI Reports 2008-NFI-02, Indiana State University, Scott College of Business, Networks Financial Institute, revised Feb 2009.
    3. John A. Tatom & Terrie Troxel, 2011. "A Report to the Federal Insurance Office," NFI Policy Briefs 2011-PB-07, Indiana State University, Scott College of Business, Networks Financial Institute.
    4. Ferro, Gustavo & Castagnolo, Fermando, 2010. "Seguros, crisis, regulación y disciplina del mercado [Insurance, crisis, regulation and market discipline]," MPRA Paper 25593, University Library of Munich, Germany, revised 01 Oct 2010.
    5. Sharon Tennyson, 2009. "Analyzing the Role for a Consumer Financial Protection Agency," NFI Policy Briefs 2009-PB-13, Indiana State University, Scott College of Business, Networks Financial Institute.
    6. Sharon Tennyson, 2007. "Efficiency Consequences of Rate Regulation in Insurance Markets," NFI Policy Briefs 2007-PB-03, Indiana State University, Scott College of Business, Networks Financial Institute.
    7. Sharon Tennyson, 2008. "State Regulation and Consumer Protection in the Insurance Industry," NFI Policy Briefs 2008-PB-03, Indiana State University, Scott College of Business, Networks Financial Institute.
    8. Sharon Tennyson, 2010. "Rethinking Consumer Protection Regulation in Insurance Markets," NFI Policy Briefs 2010-PB-07, Indiana State University, Scott College of Business, Networks Financial Institute.
    9. Scott E. Harrington, 2009. "The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 785-819, December.
    10. Scott E. Harrington, 2011. "Insurance Regulation and the Dodd-Frank Act," NFI Policy Briefs 2011-PB-01, Indiana State University, Scott College of Business, Networks Financial Institute.
    11. Ferro, Gustavo, 2010. "Insurance regulation and the credit crisis. What’s new?," MPRA Paper 22296, University Library of Munich, Germany.

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