According to this article from Investor’s Business Daily, the new financial regulations included setting up the Office of National Insurance:
This office “shall have the authority to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance.”
If the Obama administration is successful in nationalizing insurance regulation, particularly with a goal of social justice, it could set off an economic disaster that will make the meltdown of 2008 look good by comparison. During the Great Depression, the insurance industry did much better than the rest of the financial markets. To protect the economy, in 1933 the Glass-Steagall Act restricted the ability of banks to get involved in risky investments; specifically, it prevented banks from going into the insurance business.
http://topics.nytimes.com/topics/reference/timestopics/subjects/g/glass_steagall_act_1933/index.html
The act worked well for 66 years. But, banks were desperate to get a piece of what they considered to be the lucrative insurance industry, and in 1995 they gained a new powerful advocate in Robert Rubin, Treasury Secretary for the Clinton Administration. Robert Rubin was viewed with awe by the main stream media as a financial genius. He is the one who proposed repealing Glass-Steagall because modern day banks were so much more sophisticated than the banks during the depression era. Those depression era financial restrictions were so yesterday. In 1999, the Gramm-Leach-Bliley Act repealed Glass-Steagall and just may have set off the entire financial meltdown we have seen over the last two years.
http://www.sourcewatch.org/index.php?title=Gramm-Leach-Bliley_Act
Shortly after he left the White House, Robert Rubin went to Citigroup, as their senior financial spokesman, for a nice $15 million per year. He brilliantly helped them take advantage of this great legislation to get into lots of exciting new investment opportunities, including the insurance business. It was a disaster. Ultimately, Citigroup was spared insolvency only after a $45 billion federal bailout. Actually, if the following article is accurate, the true cost to tax payers is much higher than that:
http://www.thenewamerican.com/index.php/usnews/politics/3225-citigroup-bailout-retrospective
During the hearings in front of congress explaining this mess, Rubin was quoted as saying:
Almost all of us involved in the financial system, including financial firms, regulators, ratings agencies, analysts and commentators missed the powerful combination of forces at work and the serious possibility of a massive crisis.”
Duh, ya think? Actually, a lot of people were warned about this, but no one was listening.
Today, very few people in the financial industry are interested in what Robert Rubin has to say, except for one place; the White House. He is one of the people helping Timothy Geithner make all these great decisions, including the new and exciting Financial Reform Legislation.
The bottom line is this. If this wonderful new government agency discovers that minorities and lower-income communities are paying more for insurance than, say…suburban white folks, they are going to try and fix the problem. What this means is insurance companies will be required to offer coverage to people regardless of loss experience and the rest of us are going to be paying higher premiums as a result.
Less you think this to be fantasy, Californians are already paying more than necessary for their automobile insurance today because of this kind of thinking. Proposition 103 was passed in 1988. This prevented insurance companies from adjusting insurance rates based on zip codes. The insurance industry fought this tooth and nail, because they thought it was unfairly discriminatory and definitely not a good idea. But, after prodding by the ever brilliant John Garamendi, the courts finally ordered the insurance industry to implement this law in 2005. It took the industry about five years to even figure out how to do it. This year, it has happened and if it hasn’t hit your pocketbook yet, it certainly will in the near future. For those of you interested in more details on how you are now subsidizing drivers in L.A., the following article does a good job of explaining the situation:
http://cainsurancesolutions4u.blogspot.com/2010/02/rural-californians-get-ready-to-pay-for.html
This probably already has your blood curdling, but that is not the major problem. It is bad enough to pay too much for insurance, but it is even worse if idiotic regulation causes insurance companies to go insolvent. The Obama administration does not seem to grasp the concept that profits are really necessary for companies to stay in business. With the insurance industry, it is not just profitability, but solvency. If the insurance industry melted down like the banks, the results would be even more catastrophic. No one would ever be able to borrow money for a car, or a boat or a home or anything else without insurance. No bank would loan the money without the security of an insurance policy protecting the collateral.
Just in case anything thinks I am over exaggerating the problem, I refer you to the following article:
http://www.kaiserhealthnews.org/Daily-Reports/2010/July/22/Consumers-Union-Analysis.aspx
Now the same group of clowns who decided banks were too conservative want to help the health insurance industry do similar financial planning. I was involved in a health care 501c9 trust where the managers decided they had too much surplus, so they gave a refund to participants. Several contacts from the health insurance industry warned me not to do that. So, I met with senior management and literally begged them to not deplete the surplus. They not only did not listen, I was criticized for daring to question their superior wisdom. Three months later there was an adverse development in loss experience and the remaining surplus was all gone. The trust literally had to borrow money to pay claims. The same people who had criticized me earlier now were begging me for a plan of action to deal with the financial disaster they created. We were able to fix it, but it took about five years to completely repair the damage that had been done in less than three months. This was one small trust. Making this kind of mistake with a major health insurance carrier would be beyond catastrophic.
There is only one good piece of news. These guys are not that sharp and their world is falling down around their heads. Even Democrats are starting to talk about extending those worthless Bush tax cuts. As Lincoln said:
You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.
Right now, they aren’t fooling anyone. Here is your therapy session. Just keep repeating the same phrase over and over and over again:
I CAN SEE NOVEMBER FROM MY HOUSE!
I CAN SEE NOVEMBER FROM MY HOUSE!
There! Feel better?
This could be our last chance.
TDM