Bill to end federal antitrust immunity worries insurers

WASHINGTON — The life insurance industry is concerned that a bill which would eliminate federal antitrust immunity for insurance could lead to unfavorable attention from the Federal Trade Commission.
In reaction to problems experienced by residents of Gulf Coast states in getting insurance settlements after Hurricane Katrina in 2005, bipartisan legislation was introduced in both chambers of Congress on Feb. 15 that would move insurance antitrust regulation from the states to the federal government.
Gulf Coast legislators predominate in sponsoring the legislation, but the group of sponsors also includes Senate Majority Leader Harry Reid, D-Nev. Other sponsors include Sen. Trent Lott, R-Miss., the Republican whip; Senate Judiciary Committee Chairman Patrick Leahy, D-Vt.; and Sens. Arlen Specter, R-Pa., and Mary Landrieu, D-La. House sponsors include Reps. Peter Defazio, D-Ore., Gene Taylor, D-Miss., Bobby Jindal, R-La., Charlie Melancon, D-La., Rodney Alexander, R-La., and Walter Jones, R-N.C.
“They think they’re trying to get at the [property-casualty] folks, but they’ve managed to hit us, too,” said Michael Kerley, senior vice president for federal relations with the National Association of Insurance and Financial Advisors in Falls Church, Va.
A major concern of NAIFA is a provision in the bill that would give the FTC the authority to conduct insurance industry studies. The FTC was prohibited from studying the insurance industry through federal legislation in 1980 after the FTC had published reports critical of the life insurance industry.
Although the FTC initially would be likely to focus on the property-casualty industry in the wake of Katrina, it could shift its sights to the life insurance industry.
“You would have to assume that you’d be seeing all kinds of studies unfairly comparing life insurance to God only knows what,” Mr. Kerley said. “They’re not in the business of helping industries,” he said of the FTC. “They’re in the business of tearing down industries.”
The legislation would repeal part of the McCarran-Ferguson Act of 1945 that prohibits the federal government from regulating insurance for antitrust violations as long as states regulate the industry in that area. All states currently have antitrust laws governing competitive behavior in the industry.
The bill would leave other regulation of the insurance industry in state hands.
A major supporter of the legislation is the Consumer Federation of America. “We’ve been pushing for this for decades,” commented Robert Hunter, director of insurance for the Washington-based group.
“The industry is trying to push for less and less regulation,” Mr. Hunter said, referring to lobbying by the insurance industry for the option to be regulated federally rather than by the states. “Yet they have a cartel structure that they’re allowed to use under McCarran-Ferguson antitrust exemption.”
Organizations that have considerable power in setting property-casualty rates and policy terms would be a chief area that Mr. Hunter believes should be eliminated if the proposed legislation were enacted. Industry-claim-data collection helps competition, Mr. Hunter said, and could be retained.
In contrast to the property-
casualty industry, “life insurers don’t collude much,” and the legislation would not have as great an effect on that segment of the industry, Mr. Hunter said.
Insurance industry officials suggest that any change in antitrust regulation of the industry ought to be paired with adoption of an optional federal charter. “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,” Whit Cornman, spokesman for the American Council of Life Insurers in Washington, wrote in an e-mail.
That is not likely, Mr. Kerley argues, since many of the primary sponsors of the legislation oppose an optional federal charter. Further, he said, while the federal charter proposal for insurance companies would be optional, federal antitrust regulation under the proposed legislation would not be.
On this legislation, the insurance industry has an ally among state insurance regulators. Although state insurance commissioners oppose an optional federal charter, they also oppose moving antitrust regulation from the states to the federal government, said Jeremy Wilkinson, spokesman for the National Association of Insurance Commissioners in Kansas City, Mo.