When Insurance Peddling Becomes a Political Flashpoint
Sometimes interesting things are cloaked in obscurity. None of us are abuzz about the International Insurance Standards Act (IISA) of 2018. Social media is silent. The media pack is circled around other prey. The two parties are arguing about hotter topics. Trump the Tweeter and Putin the Provoker are as far removed from IISA as it gets.
In addition to the dullness of an industry dominated by esoteric things like actuarial tables, many of us have an innate dislike for large insurance companies. As a populist, it’s hard for me to sympathize with corporations that work the system so the odds may ever be in their favor as they profit from accidents and illnesses, enmity and death. On the other hand, there’s something positive about shared risk and living in a land that allows us the freedom to buy—or not buy—insurance policies.
We don’t have to be corporate enthusiasts or insurance experts to know that legislation like IISA has underlying political implications. The lead sponsor of H.R. 4537 is Representative Sean Duffy, Republican from Wisconsin. The House approved his bill by voice vote in July. It’s now being considered by the Senate Banking Committee.
As summarized by Allison Bell at ThinkAdvisor, IISA would “Require insurance trade deal negotiators to oppose proposals that conflict with U.S. laws; Require trade negotiators to consult with state insurance commissioners and Congress before making insurance deals; [and] Give Congress a process for rejecting international insurance deals.”
The insurance industry is not monolithic. IISA is supported by the Property Casualty Insurers Association and the National Association of Mutual Insurance Companies. It’s opposed by the American Council of Life Insurers and the Reinsurance Association of America. In the words of Bell, there appears to be a divide between “groups with bigger, more export-minded members” and “groups with smaller, U.S.-focused members.”
The co-sponsors of Duffy’s bill are mostly a nationalist (or protectionist) group when it comes to trade. In June 2015, when the House narrowly passed the Trade Promotion Authority bill—opening the door to President Obama’s fast-track negotiation of the Trans-Pacific Partnership (TPP) agreement—four of the then-serving six sponsors voted no. And it may not be a coincidence that while the two insurance trade associations opposed to the Duffy bill—ACLI and RAA—have their headquarters in Washington, the two pro-Duffy groups are headquartered in the Midwest (NAMIC in Indianapolis, PCIA in Chicago—although each has a lobbying office in D.C.).
R.J. Lehmann of the R Street Institute, a libertarian-leaning think tank, argues against the International Insurance Standards Act because it will tie the hands of negotiators as they push for expansion of U.S.-based financial services “on the global stage.” He laments that insurance in our nation has traditionally been “a completely state-regulated industry” and praises Dodd-Frank for creating an office in the U.S. Department of Treasury that can now sometimes override state law in the context of international agreements. Lehmann also condemns IISA for requiring federal officials to “submit to a statutorily mandated consultation with state officials,” referencing Article VI, Clause 2 of the U.S. Constitution.
The Supremacy Clause, written in 1787, refers to the founding document and to federal laws and treaties made in pursuance thereof as “the supreme Law of the Land” and requires that “the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” The Tenth Amendment to the Constitution, written two years later, provides that the “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
A balance between the Supremacy Clause and the Tenth Amendment was maintained while each level of government stuck to its constitutional areas of concern. The balance was slowly destroyed as federal power intruded into areas formally—and formerly—reserved to the states. Not surprisingly, the federal judiciary facilitated this growing imbalance.
For over a century, most federal judges have upheld the Supremacy Clause while ignoring the Tenth Amendment. Conservatives and libertarians should not make this mistake. There is nothing unconstitutional about Congress mandating that trade agreements must be in line with existing state laws and norms. The Supremacy Clause’s federal power would rarely be brought into play if the Tenth Amendment’s protection of states’ rights were being respected.
For “market-oriented” libertarians, concerns about limited government often give way when decentralization bumps up against the imperatives of big business. Hence we sometimes see enthusiasm for federal power over state, and global economics over national.
If we were anarchists or libertarian purists, we would say that government at all levels should stay out of insurance because there should be no government at all or at least no government regulation of the marketplace. But that’s not the world we live in. Some government is going to regulate so we need to respond with a preference: local, state, national, or international. Bearing in mind principles like democracy, subsidiarity, and efficiency, we should prefer the lowest level practicable.
Similarly, while we don’t have a completely free market in our society, we should press for more laissez-faire and less crony capitalism. What is commonly called “free trade” is really managed trade—in other words, the opposite of free trade. Truly free exchanges of goods and services across borders does not require thousand-page government agreements and subsequent transnational enforcement.
The International Insurance Standards Act contains three dichotomous themes: state versus federal, legislative versus executive, and national versus transnational. We see these same contrasts on a wider scale in the Bricker Amendment of the mid-1950s. It was a proposed constitutional amendment that would have required congressional approval of executive agreements before they could affect domestic U.S. law. It was backed by nationalists and opposed by internationalists. Faced with resistance from President Eisenhower, the Bricker Amendment went down in defeat.
Given President Trump’s outlook and bipartisan grassroots frustration over the downsides of globalization, perhaps IISA will fare better. I’m no expert on insurance, but means matter, and I’d prefer that rules be decided by elected legislators rather than appointed bureaucrats, by state officials rather than federal officials, and by neighbors at home rather than globalists abroad.
Jeff Taylor is a professor of political science at Dordt College. His latest book, co-authored with Chad Israelson, is The Political World of Bob Dylan.