The Professional Insurance Agents Insurance Foundation has issued a new white paper on the state of insurance regulation in the United States that will likely stir the ongoing state vs. federal debate.

In it, author Mark Boozell, former director of the Illinois Department of Insurance, says one only needs to look at the 2002 creation of the Department of Homeland Security to shed some “useful light” on the potential pitfalls of ambitious federal reorganization of insurance.

He writes that while the DHS combined existing federal agencies into one with the purpose of securing the American homeland, the “resulting mass remains a largely segregated and redundant organization with lingering loyalties to individual agency missions and jurisdictions.”

Furthermore, the state and local law enforcement agencies, for which the DHS was created to serve, have been “frustrated and disenfranchised” by the department's frequently changing personnel, initiatives and mandates, Mr. Boozell said. “The country is kept safe, but arguably in spite of the new system rather than because of it.”

Like the DHS, there are a number of federal entities that have responsibilities that relate to U.S. insurance laws, regulations, insurers and producers and that work with state insurance departments and the NAIC. Among them are the Office of the Comptroller of the Currency, the Internal Revenue Service, the Securities and Exchange Commission, Health & Human Services, the Labor Dept., the National Flood Insurance Program and the Federal Crop Insurance Program, Mr. Boozell said.

Many federal agencies and departments already work with and depend upon what Mr. Boozell says is “the safety net of well-organized, well-staffed and institutionally informed regulators at the state level” to help coordinate the federal playing field.

“Therefore, why should anyone expect that thrusting unprecedented new levels of authority into the maze of existing federal agencies will create a better environment for insurers and a safer, more reliable product for consumers? In truth, nobody really knows and the degree of uncertainty is a serious ‘red flag' for the public policy process,” Mr. Boozell said.

Anyone want to sound off?