NCPA - National Center for Policy Analysis

Step One To Federal Insurance Regulation?

February 6, 1998

Last year, Rep Joe Kennedy (D-Mass.) inserted an amendment into a banking deregulation bill that would apply the Fair Housing Act of 1968 to property and casualty insurers that operate under financial services holding companies. Any insurer that engaged in illegal discrimination in insurance or annuity sales would lose its holding company charter unless it corrected the problem.

The deregulation bill is awaiting action in the House. The Senate has no comparable bill.

Some legal experts see the amendment as an attempt to federalize insurance regulation -- a responsibility heretofore left to the states. Critics call the proposal a "legal shakedown" and predict civil rights attorneys would find "ripe pickings" based on spurious allegations.

  • The Federal Reserve Board and the Department of Housing and Urban Renewal would be charged with handling deregulation.
  • The purpose of the amendment, according to supporters, is to outlaw redlining of non-white neighborhoods -- denying insurance to those who live in or own property there.
  • But insurance industry representatives point out that the Fair Housing Act does not even mention insurers and the amendment would duplicate existing state anti-discrimination laws.
  • Federal courts have held since 1980 that the Act does not apply to insurers.

Dan Zielinski, a spokesman for the American Insurance Association, noted that the provision would put the federal government "in the awkward role of insurance regulator."

The fear of having holding company status removed, Zielinski said, "would create tremendous pressure on insurance companies to settle early rather than fight, no matter how weak the accusation."


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