A Reexamination of Federal Regulation of the Insurance Industry

Abstract

The Optional Federal Chartering (OFC) proposal introduced in the last session of Congress may have been the right bill for the introduction of federal regulation of the insurance industry at the turn of the 20th century. However, the current OFC proposal shows its 19th century roots as it merely copies the banking industry’s dual chartering provision and various aspects of state insurance regulatory law. This paper critiques the issue of federal regulation, not necessarily from the perspective of whether federal regulation dominates state regulation, but as to whether the federal or state regulation is structured sufficiently to minimize market failures or to minimize the effect of regulatory failures.