I have been Insurance Commissioner in Kansas for almost 12 years, and during much of that time some people have proposed that the federal government regulate insurance.
Representing state commissioners, I have testified before congressional committees on insurance issues, and Kansas Insurance Department staff members have worked closely with some federal officials.
While those collaborations have been good for the most part, federal agencies overall don’t seem to have a lot of insurance knowledge or experience.
Based on my experience, I believe state insurance regulation has worked well and keeps getting better. I also believe that however well-meaning the idea is, federal regulation of insurance would not be as effective.
States have regulated insurance companies during good and bad times for nearly 150 years.
Most recently, the 2008 Great Recession produced several large federal bailouts. During that time, the state insurance regulatory system performed well.
The problems with AIG, a large conglomerate, are sometimes raised as insurance regulatory problems. However, AIG’s life and property/casualty insurance weathered the storm. AIG’s biggest problems came from their federally-regulated financial products division.
Many federal advocates don’t understand why individual states do things differently; at times, they also don’t understand company practices. The advocates sometimes want uniformity where differences should be allowed.
State regulators do work together through the National Association of Insurance Commissioners. The NAIC sponsors an open process to discuss key issues. Financial reporting, rate and form filing, and licensing are all addressed through this process.
The NAIC also provides funding for outside consumer representatives to provide their viewpoints. This NAIC process allows states to develop best practices for local regulation. These practices in turn work to balance the needs of consumers, companies, and regulators.
State regulation strikes a balance between two important objectives. The first is finding some consistency of requirements across states. This goal is especially important to financial matters, such as making sure companies have enough reserves to handle claims and operating expenses.
The second goal is to reflect state differences where needed. For example, each state’s economy and cost differences may be important for certain coverages. It’s also easier to handle consumer complaints at the state level, especially in Kansas, where you will get a live person on our department’s Consumer Assistance Hotline at 1-800-432-2484.
Effective insurance regulation must constantly adapt, because economic conditions change over time. And, because the insurance business covers many product types with different risks, new products are designed each year. Medical and property/casualty claims costs are constantly changing. Do you think a federal agency and Congress could keep up with the needed changes?
Even more stable products such as life insurance provide coverage over many years. Companies must set aside reserves for these future claims. Because state insurance regulators monitor companies on a regular basis, consumers can feel safer knowing local people are watching the safety of their policies.
At the Kansas Insurance Department, we emphasize the idea, “Do the right thing.” We honestly strive for that ideal.
Doing the right thing usually means applying principles to individual situations. It means having flexibility and using judgment and, in our case, good Kansas common sense.
We currently have a good balance in state insurance regulation. We have the benefit of a local view of issues, and we have the NAIC to help states work together.
This balanced approach has worked well for a long time. I don’t think a federal approach would likely work better.

The Kansas Insurance Department, established in 1871, assists and educates consumers, regulates and reviews companies, and licenses agents selling insurance products in the state. More about the department is online at www.ksinsurance.org or at www.facebook.com/kansasinsurancedepartment.