Called ‘duplicative bureaucracy,’ Federal Insurance Office is targeted

The Trump administration’s rush to remake government has spread to Congress where one new representative has set his sights on eliminating the Treasury Department’s Federal Insurance Office (FIO).

Montana Republican Rep. Troy Downing made abolishing the FOI his priority as a freshman congressman, saying the tiny insurance regulator has worn out its welcome.

“Regulation of the insurance industry rests with the states, not big government,” said Downing, a former one-term insurance commissioner. “FIO is a duplicative federal bureaucracy whose existence hinders the efforts of state regulators better equipped to address the insurance needs of their communities.

Downing’s bill was co-sponsored by 10 other Republican lawmakers and has received support from the National Association of Professional Insurance Agents (PIA), the National Association of Mutual Insurance Companies (NAMIC), and the Independent Insurance Agents & Brokers of America.

“The Federal Insurance Office’s burdensome regulations and oppressive federal oversight of each state’s insurance market are glaring examples of the federal government’s excessive overreach,” said Rep. Ben Cline (R-VA). “State laws protecting the availability of insurance for millions of Americans should be defended, not used as a political football.”

The FIO was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Its purpose is to provide a federal perspective on the insurance industry, which is traditionally regulated at the state level. Among other roles, the FIO advises the federal government on domestic and international insurance matters, identifies gaps in regulation, monitors access to affordable insurance products in underserved communities, and prepares reports on the state of the insurance industry, including emerging risks.

FIO releases report

The FIO, for example, just released a comprehensive report on homeowners' insurance that found premiums in climate-vulnerable areas are 82% higher, on average, for homeowners in high-risk zones. Insurers in those regions, the report said, are issuing more non-renewals due to climate-related risks.

The FIO’s annual operating budget is estimated at just a few million dollars. While its staffing levels are not publicly disclosed, it is likely staffed by a small team of professionals with expertise in insurance policy and regulation.

But almost since its start, critics have argued the office is redundant to state regulators, and represents an unnecessary expansion of federal oversight. Since it has limited enforcement powers, some question even whether the office justifies its cost, regardless of how trivial it might be.

Climate disasters cited

Consumer advocates were quick to blast Downing’s bill. They called it especially ill-timed as climate disasters intensify across the country and fires rage in Southern California, driving property insurance premiums through the roof and triggering record non-renewals. One group pointed out that Downing’s home state has the second highest catastrophic wildfire risk in the nation, with homeowners seeing insurance rates spike more than 68% in the last five years.

“States have failed for decades to provide a consistent, reliable source of public data to monitor insurance markets,” said Carly Fabian, Senior Policy Advocate, Climate & Insurance for Public Citizen. “The fact that the Federal Insurance Office and Senate Budget Committee, not the NAIC, were the first to propose and now to recently publish data on [climate change] shows just how far behind states are.”

Fabian said it is no surprise that the FOI has been subject to continuous industry attacks.

“Some of these attacks may be designed in vain to squash attention to the impact of climate change on insurance markets,” she said.

Montana, she noted, did not participate in the NAIC’s data collection.

“Attacking the one national entity designed specifically to monitor this type of crisis is going to look increasingly out of touch to people struggling with rising premiums and insurance withdrawal,” she said.

But Republican critics, lawmakers, and lobbyists say simply that the FIO is doing the job that is being done, or should be done, by state regulators and has overstepped its authority and purpose.

FIO has 'pushed the bounds'

“Since its inception, and especially recently, the Federal Insurance Office has pushed the bounds of its statutory mandate as an informational resource for federal policymakers,” said Jimi Grande, the senior vice president of political affairs at NAMIC.  “FIO has become a tool for political agendas, overreaching and creating confusion and burdensome costs for consumers, often just to duplicate the work of state insurance regulators.”

The president’s pick for Treasury Secretary, Scott Bessemer, has not yet indicated the administration’s plans to address the insurance crisis, which has been identified in some economic circles as a key driver of  inflation.

“The NAIC has never issued a national report on auto insurance affordability as FIO has or provided nationwide data about homeowners insurance coverage that can be used by Congress, the Administration, and the public to ask important questions about housing, land use, systemic financial risks, and other important questions,” said Douglas Heller, director of insurance at the Consumer Federation of America. “Many state regulators would rather spend time trying to gin up a turf war rather than focusing on solving some very serious insurance problems facing the residents of their state.”

Heller said the FIO’s operating costs would “not be a blip on a blip” of the national budget and is worth keeping.

“It is not redundant,” he said. “Scuttling the ability of the federal government to investigate and report on important questions about a critical piece of our nation’s financial infrastructure — the insurance system — reveals more about the insecurities of some regulators than about their interests in protecting consumers.”

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].