Today, insurance is the only major financial industry that is not formally regulated at the federal level—a tradition dating back to the 19th century. As the nation's insurance industry has become increasingly global in nature, many have begun to question whether the federal government should play a greater regulatory role in this market. The 2008 financial crisis, and the disputed role that U.S. insurers played in precipitating one of the world's worst economic downturns, has re-ignited this debate once more in Washington.
Lately, there has been a consensus that insurance industry regulation needs to be modernized in some fashion. Exactly who should regulate the insurance industry, however, has become a point of contention on Capitol Hill. In the aftermath of 2008, leaders of the major industrial nations agreed to hold the world's largest financial institutions accountable by strengthening the global financial regulatory framework. As a result, supporters of a federal regulatory system say that the United States needs a singular regulatory framework as contrasted with the existing multi-state system and would benefit from a single U.S. insurance voice at the international standard setting level. On the other hand, opponents of greater federal industry participation assert that it will increase prices and stymie domestic policy innovation. Instead, they say that improved regulation at the state level will allow insurers and local regulators to best manage the needs of their provincial customers while competing on a global scale.
What role should the federal government play in regulating the country's insurance industry? Should insurance be left to the states to oversee, or is a streamlined federal regulatory body necessary for proper industry oversight in today's globalized economy? And what are the international implications of this debate? These were some of the questions discussed at National Journal's April 29th policy summier that convened the nation's key opinion leaders for a robust discussion on insurance regulatory modernization, both home and abroad, in the 21st century.