WASHINGTON—A House committee has voted to totally exempt insurance companies and their products from oversight by a proposed U.S. Consumer Financial Protection Agency.

The exemption was approved late yesterday by the House Financial Services Committee in a voice vote on an amendment to the legislation (H.R. 3126), that would create the new agency.

Rep. Gwen Moore, D-Wis., and Rep. Erik Paulsen, R-Minn., introduced the amendment at the request of Credit Union National Association Mutual Insurance Society.

CUNA Mutual Group is based in Madison, Wis., in Ms. Moore’s district.

The decision was lauded by officials of the American Insurance Association and the National Association of Mutual Insurance Companies. Both trade groups had joined CUNA in arguing for the exemption since the Obama administration proposed draft legislation in August.

In several titles, it says specifically that the “term ‘financial activity’ shall not include the business of insurance,” and includes reinsurance in the definition of the business of insurance.

The amendment also includes language barring the agency from stepping on the toes of state insurance regulators in their oversight of insurance companies and products.

The amendment was added because under the original bill as drafted by the Obama administration and Rep. Barney Frank, D-Mass., chairman of the committee, the new agency was given the authority to regulate credit, title and mortgage insurance products.

Ms. Moore’s original amendment would have totally exempted these products, many of which have low loss ratios, from oversight from the proposed CFPA.

But, under pressure from the Treasury Department and consumer finance advocates, the amendment was modified to preserve the proposed agency’s ability to regulate unfair and deceptive practices of individuals currently not regulated by state regulators, according to congressional staffers and industry officials.

Blain Rethmeier, AIA spokesman, lauded passage of the amendment.

“Insurance products protect consumers against risk of loss,” he said.

The fact that some insurance protection covers risks surrounding a credit transaction does not alter the essence of the product being offered -- a promise to provide protection in the event of a loss, he explained.

“Given this distinction, along with the strong consumer protection laws governing the industry, AIA and its member companies believe that no forms of insurance should be included within the CFPA mandate – including mortgage, title and credit insurance,” he added.

Jimi Grande, NAMIC senior vice president of federal and political affairs, added that, “NAMIC commends Rep. Moore and Rep. Paulsen for their work to prevent an unnecessarily duplicative and costly regulatory scheme that would ultimately hurt the very consumers the legislation is meant to protect.”

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