Over a year since the passage of the Dodd-Frank financial law, the new Federal Insurance Office, which has broad authority to collect data from the $934 billion industry, finally has a director.
Michael McRaith, the newly appointed head, is currently director of the Illinois Department of Insurance. Treasury Secretary Timothy Geithner announced the appointment last week.
While the insurance industry, which is regulated at the state level, largely escaped the reach of the new financial law. The one exception was the creation of the new office within the Treasury Department.
While not a regulatory body, the office will advise the secretary on the state of the insurance industry and whether a particular company is “systemically important” and therefore subject to federal regulation. The director also has a seat on the Financial Stability Oversight Council.
The collapse of giant American Insurance Group in September 2008 was one of the major events in the financial meltdown, with the company eventually collecting $182 bilion in federal bailout funds.
McRaith, who has donated nearly $60,000 to Democratic candidates and party committees over the past decade, including contributions to President Barack Obama’s 2008 campaign, has earned plaudits from as disparate groups as the conservative Heartland Institute and the liberal Illinois Citizen Action.
“We’re very happy and very sad, because we’re sorry to see him leave Illinois,” said Lynda DeLaforgue, co-director of Illinois Citizen Action.
He also has broad support from the insurance industry groups, which issued statements applauding his appointment.
But McRaith, who currently serves as secretary-treasurer of the National Association of Insurance Commissioners (NAIC), has testified frequently before Congress on the importance of retaining state authority over insurance.
For example, in 2009, he told a Financial Services Subcommittee, "The state-based insurance regulatory system is one of critical checks and balances, without the perils of a single point of failure and omnipotent decision making…States have a long history of consumer protection and market stability – the two pillars on which any system of financial stability regulation can, and must, be built."
And in 2008, testifying about the original proposal to create a federal insurance office, he cautioned that state regulators would object to any federal entity that had authority to preempt state consumer protections or solvency standards.
McRaith, however, appears to be amenable to collecting data from the industry. Last year he said the NAIC would obtain information from insurance companies about the use of credit scores in auto insurance underwriting, points out the trade journal Insurance and Technology
Some in the insurance industry hope that he will rely on exisiting collections of data rather than mandating new ones. The National Association of Mutual Insurance Companies (NAMIC), which has been outspoken about its worry that the new office will overreach, stated that it hoped McRaith, with his state background, will rely on state agencies and associations for data, rather than compelling industry to supply more directly.
Matt Brady, a NAMIC spokesman, said that McRaith could rely, for example, on NAIC for such data as corporate governance information, consumer complaints, claims handling information, and market conduct information.
A request to McRaith’s Illinois office for an interview was returned by email with this generic statement, "I am honored to be appointed by Secretary Geithner to be Director of the Federal Insurance Office. I look forward to the challenges of that office when that work begins. In the meantime, I’m focused on my duties as Director of Insurance in Illinois, serving in Governor Quinn’s administration, and doing my best on behalf of the people of Illinois.”