McCarran Repeal Legislation Introduced

The two have since exchanged positions and joined with Sen. Harry Reid, D-Nev., Senate majority leader, and Sen. Trent Lott, Senate minority whip, to introduce legislation that would provide the FTC and the Department of Justice joint antitrust enforcement authority over the insurance industry.

Companion legislation has also apparently been introduced in the House, although none of the potential sponsors have confirmed they have introduced it.

The legislation provides no guidance as to when or how the agencies are to tell the insurance industry the manner in which they will enforce the law. Nor does the legislation provide–or require the agencies to provide–any safe harbors that would allow, for example, the sharing of loss data or dissemination of uniform forms–a critical provision that is creating great concern in the property-casualty industry. Last year’s legislation provided such safe harbors.

In his comments, Kerley said NAIFA has been a “staunch defender” of McCarran-Ferguson Act since its enactment in 1945.

For NAIFA, he said, “the McCarran-Ferguson Act is the bedrock of the state insurance regulatory system. Without it, all segments of the insurance business would be regulated by the federal government–specifically, by the Federal Trade Commission and the Department of Justice.”

He explained that S. 618 would amend the McCarran Act in such a way as to bring the FTC and the DOJ into direct regulation of unfair methods of competition, which is now the province of the states.

“Bringing the FTC and DOJ into this area would in fact supplant the state laws that currently exist in all states,” he said. The primary losers in this action would be property-casualty insurance companies, which now are permitted to share loss data.

He added, “It’s likely that smaller companies would be hard-pressed to replace the data they now get from companies sharing that information. The life insurance side of the industry may not be impacted, depending on how the FTC or the DOJ decides to implement the changes made by the Senate bill. There is little, if any, sharing of loss data among life insurance companies.”

McCarran-Ferguson has effectively ceded insurance regulation to the states since its enactment in 1945. That McCarran-Ferguson is the law of the land was specifically reiterated in the Gramm-Leach-Bliley Act of 1999.

The McCarran-Ferguson Act currently exempts the “business of insurance” from federal antitrust laws to the extent that it is regulated by the states.

In a statement released when the bill was introduced, its chief sponsor, Sen. Leahy, said: “Federal oversight would provide confidence that the industry is not engaging in the most egregious forms of anti-competitive conduct, price-fixing, agreements not to pay and market allocations.”

“Insurers may object to being subject to the same antitrust laws as everyone else, but if they are operating in an honest and appropriate way, they should have nothing to fear,” Leahy added.