State Farm Supports Treasury Secretary's Call for Optional Federal Charter for Insurance

BLOOMINGTON, Ill., March 31 /PRNewswire-USNewswire/ -- State Farm commended Treasury Secretary Henry Paulson's call for an optional federal charter for insurance regulation as part of its recently released Blueprint for Financial Regulatory Reform. The Treasury Department calls for the creation of a world-class insurance regulator through the establishment of the Office of National Insurance within Treasury. The report states: "Much like other financial services, over time the business of providing insurance has moved to a more national focus... [The current] regulatory structure makes the process of developing national products cumbersome and more costly, directly impacting the competitiveness of U.S. insurers... To address these issues in the near term, Treasury recommends establishing an optional federal charter for insurers..."

The report goes on to state:

"Under the current regulatory structure some lines of property and casualty insurance, such as automobile and homeowners, are frequently subject to some form of rate regulation. While numerous arguments have been made to justify such rate regulation, they are unpersuasive, especially since several states leave insurers largely free to set their own rates and Illinois does not have any rate regulation. In those states there is vigorous price competition and there has been no evidence of excessive profits, and the insurers competing in those states have remained financially sound. States that do not impose onerous rate controls generally do not have large residual markets (markets of last resort) and they have more competing insurers and overall lower rates. As a substitute for price controls, a federal regulatory structure should ensure that insurers are financially sound that consumers are protected from misconduct by competing market participants."

Ed Rust Jr., Chairman and CEO of State Farm, the nation's leading vehicle and home insurer, said, "The current regulatory structures make serving insurance customers across the country complicated, costly and cumbersome. Increasingly, insurance challenges are also national and international in scope. In the 21st century, we should be able to do better for our customers. That is why we applaud Secretary Paulson's call for an optional federal charter."

State Farm(R) insures more cars and homes than any other insurer in the U.S., is the leading insurer of watercraft and is also a leading insurer in Canada. State Farm's 17,000 agents and 67,000 employees serve over 77 million auto, fire, life and health policies in the United States and Canada, and more than 1.9 million bank accounts. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No. 31 on the Fortune 500 list of largest companies. For more information, please visit statefarm.com(R) or in Canada statefarm.ca(R).