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NAMIC Warns Congress of Unintended Consequences

WASHINGTON (March 7, 2007) — The National Association of Mutual Insurance Companies (NAMIC) today urged Congress to reject attempts to repeal the limited antitrust exemptions allowed for insurance companies. Such action could reduce competition, increase insurance costs, and reduce availability for some high-risk coverages, NAMIC said in a written statement submitted to the Senate Judiciary Committee. The panel held a hearing on efforts to repeal the McCarran Ferguson Act.

“The existence of the McCarran-Ferguson limited antitrust exemption serves to make the industry more competitive, not less,” said Carl Parks, NAMIC senior vice president of government affairs. “Proposals to repeal or limit the exemption would threaten activities that have increased competition and provided significant benefits to America’s consumers.”

Congress adopted the Act in 1945 to allow states to continue regulating insurance. It also provided a very narrow exemption from the federal antitrust laws.

The application 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.

Since insurance is a promise of future financial obligations, insurers lack complete information about the ultimate cost of the product at the time it is needed. Consequently, the policy premium is based on a best estimate of those costs. Insurers develop their best estimates through information from a large number of losses over a significant time period. Few insurers — especially smaller and medium-sized companies — have enough information on their own to evaluate every type of risk they underwrite. Without advisory loss cost data, they would be unable to compete with larger companies.

Opponents of the exemption have based their objections on unproven assertions that the antitrust exemption has led to collusion within the industry, however, there has been no evidence to support these allegations. The industry is highly regulated by state insurance officials who monitor not only safety and soundness issues, but also any potential anticompetitive and unfair trade practices.

“It is highly likely that rather than increasing competition, repeal or limitation of the McCarran-Ferguson limited exemption would perversely reduce competition, increase insurance costs, and reduce availability for some high-risk coverages,” Parks said.

For further information, contact
Nancy Grover
(202) 628-1558 Tel
(202) 628-1601 Fax

Posted: Wednesday, March 07, 2007 12:00:00 AM. Modified: Wednesday, March 28, 2007 10:45:42 AM.

317.875.5250 - Indianapolis  |  202.628.1558 - Washington, D.C.

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