The Senate Judiciary Committee will hold a hearing March 7 on whether the anti-trust exemption enjoyed by insurers through the McCarran-Ferguson Act is good for consumers.
Two senators from coastal states will recount their problems with the property-casualty insurance industry’s handling of Hurricane Katrina claims at the hearing.
No life insurance industry official will represent the industry at the hearing, which will also showcase a homeowner from New Orleans.
But a spokesman for the American Council of Life Insurers made clear the issue is of critical importance to the life industry.
“Insurance regulatory reform is one of our top priorities,” said ACLI’s Whit Cornman. “Since this is the first hearing for the year on this topic, we’ll be very interested to see what develops.”
At the same time, Cornman said, the ACLI believes that a discussion of McCarran-Ferguson should be part of an overall optional federal charter debate.
“If Congress is going to consider McCarran-Ferguson, it should do so as part of the broader discussion of an optional federal charter and insurance modernization and not as an isolated matter,” he said.
The Senate hearing will focus on the issue “The McCarran-Ferguson Act and Antitrust Immunity: Good for Consumers?”
Sen. Patrick Leahy, D-Vt., chairman of the panel, is the lead sponsor of S. 618, the Insurance Industry Competition Act.
The bipartisan bill was introduced Feb. 15 by Leahy; Sen. Arlen Specter, R-Pa., ranking minority member of the committee; Sen. Harry Reid, D-Nev., Senate majority leader; and Sen. Trent Lott, R-Miss., Senate minority whip.
The decision to hold a hearing so soon after the introduction of the bill clearly signals that the committee wants to determine quickly whether there is enough political support for the bill to spend time on it in this Congress.
It is being held early in the congressional year because the schedule is crowded, and getting the bill through the committee promptly is important if it is to be enacted in this 2-year Congress.
The first person to testify will be Sen. Lott, an original sponsor of the bill and a harsh critic of the p-c industry’s handling of claims resulting from Katrina. Lott sued State Farm because it didn’t handle his claim promptly, although his lawyers say the claim has recently been settled.
Joining Lott will be Sen. Mary Landrieu, D-La., who is facing re-election next year.
The second panel will consist of Michael Homan, a homeowner from New Orleans; Robert Hunter, insurance director of the Consumer Federation of America; and Marc Racicot, president of the American Insurance Association. Michael McRaith, Illinois director of insurance, will also be on that panel as a representative of the National Association of Insurance Commissioners.
Property-casualty insurance industry lobbyists have voiced deep concerns about the bill, especially its potential impact on small insurers and agents.
At the same time, while unwilling to comment publicly, there is serious doubt within the insurance industry that supporters of the bill will be able to garner the 60 votes necessary to force action on the Senate floor, especially when the issue of its potential hurtful impact on small insurers and agents is pointed out.
The bill would give the Department of Justice and the Federal Trade Commission the authority to apply antitrust laws to “anti-competitive behavior by insurance companies,” as voiced by Leahy in a floor statement made when he introduced the bill, although no evidence has been supplied of such behavior by insurers or agents.
Another provision that deeply concerns the life insurance industry would remove a provision of the Federal Trade Commission Act barring the agency from undertaking probes or issuing reports on insurance industry practices without direct congressional authorization.