Legislation introduced in the Senate on Feb. 15 that would repeal the insurance industry’s antitrust exemption under the McCarran-Ferguson Act would impose federal regulation on top of state regulation, according to industry officials and lawyers.
The bill, S. 618, The Insurance Industry Competition Act of 2007, is radically different than legislation introduced last September in the Senate.
Among its provisions is a section that would eliminate a prohibition imposed on the Federal Trade Commission’s authority to investigate insurance companies unless directly authorized to do so by Congress.
According to industry officials, that provision was added in 1980 at the life insurance industry’s behest after then-FTC Chairman Mike Pertschuk sought to undertake studies comparing life insurance products with mutual funds.
Additionally, those who are touting it as a “back door” way to get an optional federal charter are being cautioned that it would do no such thing.
“The issue of whether to amend the McCarran-Ferguson Act should be considered along with proposals to create an optional federal charter (OFC) regulatory system for both the property-casualty and life insurance industries,” said Michael Kerley, senior vice president of federal government relations for the National Association of Insurance and Financial Advisors.
“While NAIFA remains neutral on the OFC proposal, supporters of OFC base their support on the premise that a federal regulator deemed helpful to the insurance industry, namely an independent regulator within the Department of the Treasury, would be created,” Kerley explained. “This has worked for national banks, for example.”
But Kerley cautioned, “NAIFA does not believe that elevating the FTC as the regulator of the business of insurance is preferable to the regulatory system now established by the states.”
He said NAIFA “does not view this federal bill in any way to be a positive ‘back door’ approach to achieving the same results as those expected from the optional federal charter proposals that have been introduced in Congress in the past year.”
The American Council of Life Insurers also declined to embrace S. 618 even though establishing an OFC is its legislative priority.
“On repeal of McCarran-Ferguson legislation, we believe this issue should be addressed within the context of comprehensive insurance reform,” said Jack Dolan, an ACLI spokesman.
S.618, an abbreviated 2-page bill, is far different than similar legislation introduced last September to no consequence by Sen. Arlen Specter, R-Pa., and Sen. Patrick Leahy, D-Vt., then chairman and ranking member, respectively, of the Senate Judiciary Committee.