Prospects are uncertain for insurers

The Treasury Department's proposal to let insurers choose federal rather than state regulation would fulfill a long-held dream of some of the industry's major players. But many doubt that this piece of the financial-regulation overhaul plan will become reality any time soon. As part of its broad bid to change how financial firms are overseen, the Treasury Department wants the power to charter insurance companies at the federal level, if they prefer. Now, insurance is regulated by states, and big insurers have griped for years that they must deal with dozens of bureaucracies and sets of rules. Under Treasury's proposal, insurers would have the option of being regulated by the federal government, though they could also remain under state regulation. (Firms that chose federal regulation would still have to comply with state laws in some cases, under the proposal.) The proposal says that state regulation makes it "cumbersome and more costly" for insurers to develop products that they can sell nationally, and "creates increasing tensions" for U.S. insurers operating abroad and foreign insurers in the U.S. But the industry does not unanimously support the concept. "We don't believe you need a massive new bureaucracy," says Robert Rusbuldt, chief executive of the Independent Insurance Agents & Brokers of America, a trade group. One concern among smaller insurers is that the big firms will gain an advantage. Smaller insurers "would have less opportunity to switch" regulatory regimes because of the time and cost involved,