Congress Shows Bipartisan Interest In McCarran

But the American Council of Life Insurers, Washington, is a strong supporter, and the Association for Advance Life Underwriting, Falls Church, Va., is also voicing support.

The American Bankers Association, Washington, has thrown its support behind an OFC through its American Bankers Insurance Association, and the Financial Services Roundtable, Washington, another banking group, has added a number of insurance company members to its roster.

At the same time, the ACLI is cautious about the timeline required to bring this goal to fruition. For example, in comments on Oct. 22 at the ACLI’s annual meeting in Orlando, Kim Dorgan, executive vice president of federal relations, acknowledged that enactment of a federal charter option is not in the near future, predicting that passage by both chambers could take from 2 to 4 years, and perhaps 5, depending on how the ultimate bill is crafted.

But the complaints about p-c industry practices indicate that Republicans as well as Democrats in the Congress want the issue of the antitrust exemption placed on the front burner for action next year, something that would play into the hands of OFC supporters.

One key player in a Democratic-controlled House will be Rep. Paul Kanjorski, D-Pa. He is the presumptive head of the Capital Markets Subcommittee of the House Financial Services Committee if the Democrats win control of the House.

In the recent past, he has been supportive of an optional federal charter, but at the last moment backed off from joining Rep. Ed Royce, R-Calif., in being a co-sponsor of such legislation when Royce introduced it in the House in late September.

Ted Besesparis, vice president of the Professional Insurance Agents of America, Alexandria, Va., which is opposed to a federal charter for p-c, confirmed that Kanjorski “seems attuned to the industry, and appears to have a good grasp of how the industry works.”

On the OFC bill, Besesparis said, Kanjorski “seems to have taken a go-slow approach. He has indicated that he might consider it for life, but he seems reluctant to consider it for p-c.”

Regarding the House Democratic leadership, Besesparis said, “According to press reports I have seen, the 17-member Katrina Democratic group in the House has endorsed the proposal to end or modify McCarran-Ferguson, but the leadership has not formally endorsed this.”

In his testimony before the Antitrust Commission, McRaith didn’t deal directly with the latest challenges to state regulation of insurance, but did defend the current industry regulatory scheme.

“McCarran’s limited antitrust exemption permits supervised cooperative activities by insurers to work in concert with comprehensive, cradle-to-grave consumer protections to promote competition, enhance consumer choice and help maintain marketplace integrity,” McRaith said.

“Discussions of its repeal must be considered in the broad economic context and cannot be viewed in a legalistic vacuum.”

McRaith noted in his testimony that that the core priority of state insurance officials is to protect consumers.

He also highlighted what he termed “the unique characteristics of insurance,” which he contended warrant special consideration under federal antitrust laws and make comparisons to other financial sector products “inherently misleading.”

He also said that state law and supervision provide active oversight of insurers’ cooperative endeavors and prohibit anti-competitive behavior.

“The third-party organizations involved with cooperative activities are licensed, structured and regulated to be consistent with state law,” McRaith said.

“Price fixing, bid-rigging, tying, boycotting or any practice that undermines competition is simply not allowed and is subject to prosecution by state insurance officials and law enforcement personnel,” he said.

McRaith is chairman of the NAIC’s Broker Activities Task Force, formed in response to revelations by New York Attorney General Eliot Spitzer of widespread bid-rigging and other anti-competitive practices.

In his testimony before the panel, McRaith outlined the NAIC’s efforts to combat illegal activities by promoting broker compensation transparency; to coordinate multi-state investigations of brokers’ and insurers business practices; and to ease the process of providing anonymous “tips” to alert insurance officials of unlawful or unscrupulous behavior.

“NAIC members have worked on these issues with attorneys general from around the nation, and have guided resolutions that have returned more than $1 billion to policyholders and imposed business reforms that honor consumer protections,” McRaith said.

“The NAIC looks forward to continued work with federal and state officials, consumers, large and small industry participants, and other interested parties to prevent and punish anti-competitive practices,” he said.