Consolidation of Insurance and Financial Regulation

The State of New York has proposed combining its banking and insurance departments into a single administrative agency.
Historically, some states with smaller insurance and financial industry footprints have combined their insurance and financial regulatory departments into a single administrative agency for cost-efficiency and productivity purposes.  Recently, however, the State of New York has proposed combining its banking and insurance departments despite having substantial state financial and insurance industries to regulate.

Elizabeth Festa at National Underwriter Life & Health asks the question: does consolidating insurance and financial regulation create a regulator that is 'Less Than the Sum of Its Parts'?
The proposed merger of the New York banking and insurance departments, with segments of the consumer protection board, will result in stronger enforcement of insurance companies, according to many parties, although the effect will probably be tempered somewhat as the bill goes through the legislative process.
Does consolidating insurance and financial regulation create a regulator that is 'Less Than the Sum of Its Parts'?
The budget is due April 1st. As of this report, the legislative option was still in the budget and would be passed us such, unless it is taken out as a separate item. The industry was busy in late March trying to defang it, to some degree.
Some see the combination as being in line with the proactive response to the AIG crisis. Others view it as part of the greater oversight of Wall Street in general, while some see Gov. Andrew Cuomo seeking to keep the luster gained from his days as state Attorney General in play.
Former (2005-2007) New York Insurance Superintendent Howard Mills, now chief advisor to the insurance group at Deloitte, said he was concerned that the regulator would become the criminal investigator as well. "We already have that function. There is no need to duplicate that. It can lead to a hostile environment for the industry," he said.
"The concern is that one would hope that [the consumer protection board function] wouldn’t become a prosecutorial type of function. Housing a regulator and a prosecutor together could duplicate to some degree what the AG’s office does," Mills said.  [excerpt]
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