Title V and the Creeping Federalization of Insurance Regulation
Originally published in The Case Against Dodd–Frank: How the “Consumer Protection” Law Endangers Americans
A quick reading of Dodd–Frank—if such a thing is possible—would lead one to conclude that the insurance industry got a pass. Dodd–Frank introduced a new consumer financial products regulator, created a council of regulators to monitor the financial system, devised a comprehensive regulatory structure for derivatives, and generally expanded regulators’ discretionary authority over the financial sector. Dodd–Frank did not explicitly remake the insurance regulatory framework. The McCarran–Ferguson Act’s assurance that insurance is primarily the province of state regulation remains the law.
Nevertheless, Dodd–Frank, perhaps inadvertently, paves the way for federalization of insurance regulation. In doing so, it conflicts with the spirit of McCarran–Ferguson by allowing non-insurance laws to override state insurance regimes. The expanding federal role in insurance regulation is likely to gradually undermine state regulation and fuel an expectation of a federal backstop, which will only serve to heighten calls for increased federal oversight of the industry. This chapter examines each Dodd–Frank contributor to the federalization of insurance, with particular emphasis on Title V, Dodd–Frank’s often-ignored insurance title. The chapter concludes with a brief sketch of possible alternatives to Dodd–Frank’s haphazard federalization approach.