INDIANAPOLIS (Feb. 16, 2007)—The National Association of Mutual Insurance Companies (NAMIC) strongly opposes legislation to modify the insurance industry’s antitrust exemptions in the McCarran-Ferguson Act. NAMIC believes the proposal is unnecessary and would hurt consumers.
“The Insurance Industry Competition Act of 2007, as introduced by Sens. Lott, Leahy and Specter would introduce a system of dual regulation to the insurance industry, ultimately leading to federal regulation of insurance,” said Marliss Browder, NAMIC senior federal affairs director. “This could threaten the viability of small insurers and lead to reduced competition, higher insurance costs and less availability for some high-risk coverages for consumers.”
It is anticipated that identical legislation will be introduced in the House of Representatives by Reps. Gene Taylor, D-Miss., Pete DeFazio, D-Ore., and Bobby Jindal, R-La.
Enacted in 1945, the McCarran-Ferguson Act entrusts states with the authority and responsibility to regulate the business of insurance. States regulate virtually every aspect of insurance, from licensing, to market practices, to financial solvency. Additionally, every state has an Unfair Trade practices Act providing the authority to investigate and, if appropriate, correct and punish unfair practices.
The existence of the exemption promotes competition in the insurance marketplace by allowing companies to exchange critical data regarding losses and other factors, allows development of standardized policy language, facilitates participation and oversight of state guaranty funds, permits state control over liquidations and enables the development and operation of assigned risk plans. It establishes a careful and well working balance between regulation and antitrust enforcement for the state regulated insurance industry and ensures parity with other financial services industries.
The Act does not include a blanket exemption from antitrust laws, but provides a targeted exemption for certain limited insurance activities. The Act has been subject to extensive court interpretation over the past 60 years. Altering it would put the effective functioning of the industry in jeopardy.
“Specifically, changes could curtail insurers’ ability to exchange critical data, endangering market participation by smaller insurers and making it more difficult for carriers to enter new markets,” Browder said. “Threats to standardization of policy language would make it more difficult for consumers to compare policies and prices. Barriers to operation of assigned risk plans and guaranty funds would undermine the functioning of insurance markets.”
While the proposed legislation would allow exceptions to the federal anti trust laws when the conduct is “within the business of insurance and is pursuant to a clearly articulated policy of a state that is actively supervised by the state,” there is nothing in it to prohibit the Federal Trade Commission from attempting to change state regulatory language.
“Congress should be wary of the unintended consequences of changes to the current limited antitrust exemption,” Browder said. “Any change to the existing antitrust regime could decrease market stability, reduce affordability and availability of products, stifle innovation and expansion, diminish industry efficiency, and ultimately, inhibit rather than increase competition in the insurance marketplace.”
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