Strange as it may seem to outsiders, the insurance industry in the US is regulated state-by-state, a nightmare for Canadian and European companies trying to break into the market, and no fun for consumers who move around and have to change companies each time.

Then there is the little issue of whether state regulators can ever begin to understand the complexity of a firm like AIG.

Is that about to change? Maybe, but don’t bet on it.

Federal regulation of the insurance industry has been talked about for years, perhaps on an optional basis, or perhaps some sort of hybrid where firms could opt for federal or state regulation, which would be a typically fuzzy American response to a difficult issue, leaving two layers of regulation. But hey, the insurance industry has been wining and dining its local regulators for years now and would be reluctant to give up their investment.

And the state insurance commissions are a great place to reward political supporters through patronage jobs.

Filed under: Technology