The primary impact of financial reform on insurance is that it preserves the authority of state insurance regulators to police the industry. An effort to introduce federal regulatory oversight, known as Optional Federal Charter, will likely be taken up by Congress in 2011. The charter would allow insurance companies to choose between the current state-based system and a single federal regulatory agency.
"I think there was a recognition that state regulation did perform well," Vaughan says.
Vaughan argues state regulators are closer to consumers, and therefore better able to address their insurance concerns than a distant federal bureaucracy. State regulators also are more likely to spot problems within the industry, she says.
J. Robert Hunter, director of insurance for the Consumer Federation of America, or CFA, located in Washington, D.C., says that depends on the state. "From the consumer's point of view, it doesn't matter who regulates. It's the quality of regulation that matters. Some states do a pretty good job -- Florida and California, for example. A lot of states do almost nothing," he says.
Impact on consumers: No change.