Not So Fast, FEDS!

Today’s high-speed world seems tailor made for centralized, quick-as-a-flash oversight which can keep pace with the latest trends in finances. That’s the basis for a strong push in Washington to take supervision of insurance products away from the states and hand it over to a Federal agency, the same system which was watching while the financial system crashed.

WHOA!  Not so fast. The one area of the financial world which did not go into a tailspin in the past year is the insurance industry which is generally governed by those slow-moving, conservative state insurance regulators. Three cheers for slow-moving and conservative.

Why? Because insurance companies must abide by rules set down by the 50 state regulators and these regulators were not “sophisticated” enough to jump on the free-wheeling, anything goes financial bandwagon of recent years. This saved insurers from the money meltdown and safeguarded policyholders during the current crisis.

One may point to AIG, a major insurance company, which owes the Government more than $175 billion, and say “How come?” The answer is that AIG got into a financial products operation which is the part of the company which is in deep trouble. The insurance part of the business is on a relatively even keel.

So, why race to go Federal when the states seem to have saved the day for the nation’s policyholders? In today’s rush-rush world a little time to think about consequences is needed so that the herd doesn’t stampede towards a cliff.

Remember the fable about the tortoise and the hare!