The National Council of Insurance Legislators (NCOIL) has voiced concerns to the Federal Trade Commission (FTC) regarding a proposed rule that NCOIL claims would infringe upon the state regulation of insurance and violate the McCarran-Ferguson Doctrine.
“This proposed rule is yet another example of why it is important for state legislators and regulators to always be alert and ready to push back on any and all attempts to undermine the state-based system of insurance regulation,” said Arkansas Representative Deborah Ferguson, NCOIL president. “Protecting consumers is always our number-one priority and the state-based system of insurance regulation has proven time and time again that it is more than capable and that federal involvement is not needed.”
NCOIL maintains that the proposed rule, if implemented without amendments, would undermine the states' authority to regulate service contracts, which have long been recognized as insurance-related products.
Currently, service contracts are regulated, either fully or partially, by state insurance departments in 43 states. These regulations often include specific requirements concerning cancellations and refunds, disclosures, demonstration of financial responsibility to handle claims, and registration of entities with the state insurance department.
Service contracts, akin to insurance, provide consumers with a means to safeguard themselves from financial hardship. These contracts protect against costly repairs, replacements, or maintenance of purchases such as mobile devices, vehicles, household systems, and appliances. They ensure coverage for operational or structural failures resulting from defects, accidental damage, normal wear and tear, or service interruption.
While the FTC may have concerns regarding the practices of certain companies offering service contracts, NCOIL maintains that the existing level of service contract regulation by states falls within the scope of their authority to regulate insurance, as granted by Congress.
“We at NCOIL urge the FTC to exempt service contracts from the proposed rule to ensure that the rule does not violate the McCarran Ferguson Doctrine and infringe on the congressionally delegated rights of the states to regulate the business of insurance,” said NCOIL CEO Tom Considine. “State insurance legislators and regulators have been effectively overseeing insurance practices and consumer protections for decades, and this proposal needlessly threatens to disrupt a system that has led to the strongest and safest insurance market in the world.”
NCOIL also recently took the IRS to task for a proposed rule that the organization said would infringe upon states’ authority in relation to captive insurers.
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