Control Donk Kanjorski is Convinced the Private Insurance Sector Cannot Evolve on its Own; it Must be Scolded with Genius Gov't Regs...

WASHINGTON (Dow Jones)--U.S. House lawmakers showed little consensus on whether the federal government should play some role in regulating the insurance industry on Thursday, as supporters and detractors sought to use the financial crisis to bolster their claims. "We can no longer continue to ask the question about whether the federal government should oversee insurance. The answer here is clearly yes," said Rep. Paul Kanjorski, D-Pa., a long-time supporter of increasing the government's role in insurance regulation. But Rep. Jackie Speier of California, a fellow Democrat, said that replacing the current state-based regulatory system is "seriously misplaced and misguided." The insurance industry and its lobbyists are looking to dull down consumer protections, she said. The debate over whether the federal government should have a role in overseeing insurance has been simmering for years in Congress, but legislation creating an optional federal insurance charter has never gained the momentum proponents have sought. Supporters hope the current financial crisis, including the prominent role of American International Group Inc. (AIG), will change the dynamic. "The events of last year really changed the debate on regulatory reform," said Rep. Ed Royce, R-Calif. Kanjorski, who chairs a key House Financial Services subcommittee, said the experience with AIG, problems in the bond insurance market, and the decision by some insurers to seek bailout funds from the Treasury Department highlight the need for a federal oversight role. State regulators have by and large "performed well," Kanjorski said, but the complexity and scope of some insurers may require federal regulation. But some lawmakers worry that the push for optional federal regulation is an attempt by insurers to copy the playbook of their banking industry brethren: use competition among regulators to weaken regulation. Rep. Scott Garrett, R-N.J., said the insurance industry may also run the risk of opening a regulatory Pandora's Box by pushing for federal oversight. "It's not too far-fetched to see a tri-layered or even quadruple-layered regulatory structure for insurance when all the dust settles," Garrett said. -By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=lqurHzy54Ksoo8yrPNKWxA%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires May 14, 2009 11:36 ET (15:36 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 11 36 AM EDT 05-14-09