While most financial services companies cringe at the thought of more regulation, Allstate CEO Tom Wilson is launching a very public campaign calling for national regulation of insurance companies.
That would be a huge change from the current system of state-by-state regulation, which creates many loopholes. Some of those gaps in regulation were exploited by AIG.
Northbrook-based Allstate is running print ads stating the case for national insurance regulation. One headline reads: "A Man-made Disaster Just Cost America Trillions -- Here's how to keep it from happening again." It calls for reform of all financial institutions and the regulatory agencies that supervise them.
In a letter to the New York Times, Wilson notes that Allstate has little presence in the market for unregulated products that triggered the global financial collapse. Still, he writes: "We have a duty to help stabilize the financial system."
Charging that state regulators "lack the expertise to properly oversee rapid innovation or systemic risks," Wilson proposes Congress establish one federal regulator for all national insurance companies.
The demand for one set of regulations is a bold one, especially for the insurance industry. The complexity of the current situation requires insurers to file individual policies on a state-by-state basis.
Meeting those diverse requirements adds a huge layer of cost to the insurance buyer. In many states, insurance commissioners are elected officials, bagging huge campaign contributions from the industry. Elsewhere, they're career bureaucrats, hoping to protect their turf.
That's why a call from one of the largest national insurance companies, serving 17 million American households, is bound to create ripples in the industry. We'll see who climbs on board next.