Strong bipartisan interest is emerging in Congress to re-examine the insurance industry’s antitrust exemption through the McCarran-Ferguson Act.
The interest, voiced recently in both houses of Congress, is being expressed even as the life insurance industry seeks to have Congress approve legislation creating an optional federal charter, something lobbyists for the American Council of Life Insurers, Washington, confirmed in comments at the ACLI’s annual meeting in Orlando Oct. 22-25 (see story above).
Ironically, emergence of the antitrust issue to the top of the congressional agenda has nothing to do with the life insurance industry.
And, the National Association of Insurance Commissioners, Kansas City, Mo., is well aware of the issue. A commissioner testified before the Antitrust Modernization Commission on Oct. 19 supporting McCarran-Ferguson.
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Michael McRaith, Illinois director of Insurance, cautioned against repeal at the hearing, noting that McCarran-Ferguson “fosters a vibrant, competitive insurance marketplace” when combined with effective state insurance supervision.
McRaith testified on behalf of Illinois and the NAIC at the hearing.
Andrew Heimert, executive director and general counsel of the Commission, said the hearing was held because the Commission was aware of congressional interest in the matter, not only as it covers insurance, but also generally. He said hearings were held on McCarran-Ferguson and the Shipping Act, an immunity for ocean vessels, in anticipation of the Commission presenting a report to Congress on the issue of exemptions by April 2007.
“We wanted to hold hearings on specific immunities that would help us illustrate some of the more general points we expect to make in our report,” Heimart said.
The growing interest in revisiting the issue has to do with congressional irritation with the property-casualty insurance industry, not with any life issue.
Specifically, legislation repealing the McCarran-Ferguson Act, S. 4025, was introduced in the Senate in late September by Sens. Arlen Specter, R-Pa., and Pat Leahy, D-Vt., because property-casualty insurance industry opposition effectively killed their efforts to set up an alternative claims resolution system for those injured by exposure to asbestos in the workplace.
And, 2 weeks ago, Sen. Trent Lott, R-Miss., told The New York Times that he planned to introduce such legislation, partly because of the way insurers handled all flood/wind claims resulting from Hurricane Katrina last September.
Then, on Oct. 19, Democratic Reps. Gene Taylor, Mississippi, and Charlie Melancon, Louisiana, said at a news conference that a Democratic-controlled House would seek to end the antitrust exemption for the insurance industry because they contend insurance industry practices shifted the financial burden of Hurricane Katrina claims onto the taxpayer.
There are 15 other House members of the Katrina task force.
Styling themselves the Katrina Task Force, the 2 congressmen say they will also recommend repeal of the McCarran-Ferguson Act antitrust exemption, as it relates to what they allege is “price-fixing” in the property insurance market.
“We’ve already had preliminary discussions with Reps. Nancy Pelosi, D-Calif., House minority leader, John Dingell, Mich., ranking minority leader at the House Energy and Commerce Committee, John Conyers, D-Mich., ranking minority member of the House Judiciary Committee, and Barney Frank, D-Mich., ranking minority leader of the House Financial Services Committee,” Rep. Taylor said.
These congressmen are presumptive heads of those panels if Democrats take over the House in the next Congress.
“And No. 1 is to take away the antitrust exemption of the insurance industry,” Rep. Taylor said. “No one should be above the law.”
Taylor said at the press conference the insurance industry was given the exemption “in about 1946. I don’t know why Congress did it then, but it makes absolutely no sense now.
“At the same time in 1946, when Congress gave the insurance industry an exemption from the antitrust laws, they kicked all responsibility for regulating the insurance industry to the states,” Taylor said.
“In some high tax, high service states, that works OK, but in a low tax, low service state like Mississippi, it hasn’t worked at all,” Taylor added. “People really don’t have anyone to turn to.”
That would play into the hands of a large segment of the life insurance industry, industry experts contend.
Some pockets of doubt remain within the life insurance industry over the efficacy of an optional federal charter, and the National Association of Insurance and Financial Advisors, Falls Church, Va., remains on the fence on the issue.