Industry groups put a positive spin on a grim report to Congressand the White House suggesting that insurers no longer deserve alimited exemption from federal antitrust law. With momentumbuilding to pull the rug out from under the McCarran-Ferguson Act,it might be time to start thinking about Plan B. What will insurersdo if their precious shield is stripped away? How would theyadapt?

The Antitrust Modernization Commission offered little solace forinsurers. The group shrugged off any concerns about losingparticular McCarran benefits–such as insurer datasharing–suggesting such problems should be worked out in thecourts.

“Like all potentially beneficial competitor collaborationgenerally…such data sharing would be assessed by antitrustenforcers and the courts under a rule-of-reason analysis that wouldfully consider the potential pro-competitive effects of suchconduct, and condemn it only if, on balance, it wasanticompetitive,” the report noted.

Indeed, the commission added, “insurance companies would bear nogreater risk than companies in other industries engaged in datasharing and other collaborative undertakings.” The report warnedthat “to the extent insurance companies engage in anticompetitivecollusion, however, they appropriately would be subject toantitrust liability.”

Insurer groups, perhaps whistling in the dark, did their best tocounter the argument that courts would be the ideal place to sortout any aftershocks to the market.

The National Association of Mutual Insurance Companies said thecommission appears “unduly confident that courts with little or noexperience adjudicating insurance issues would be able todistinguish clearly between 'pro-competitive' cooperative insurancepractices and those that have 'anticompetitive effects.' We are notnearly as optimistic about this prospect as is the commission.”

Could you imagine the trouble and expense of litigating theindustry's data sharing and standardization of policy language? Itwould be a field day for trial lawyers, without any apparentbenefit to consumers.

Has anyone proven that insurer data-sharing underminescompetition? To the contrary, such practices allow smaller carriersto compete with the big boys, providing more options for buyers andkeeping prices lower than they would be in a purely Darwinian freemarket, where only the largest carriers–able to live off their ownmassive databases–could survive.

Is all this fuss really necessary? As the Property CasualtyInsurers Association of America pointed out, “existing state andfederal laws expressly prohibit insurers from collusion, and theexemption only allows insurers limited authority to share specificloss data that ultimately makes the market more competitive…”

The evidence appears to be overwhelming that revoking McCarranprotections would be counterproductive for buyers, but thepolitically driven assertions of a growing number of hostilefederal officials is unfortunately just the opposite.

I can't help but wonder whether insurance groups and individualcarriers are starting to think about life beyond McCarran. If theworst happens, the industry could just stick to its guns, keepsharing data and defend their cooperation in court. But that routewould be costly–prohibitively so if a wayward jury concludes thatcarriers have harmed consumers in some way, hitting them withtriple-damages.

Or insurers could just jettison the industry's entire standardoperating procedure, with all carriers left to fend for themselves.The jumbo insurers might get along just fine, although there arebound to be some transition problems. But the smaller fish would beat risk, and some could go belly up under the new competitiverestrictions. That certainly wouldn't do anyone any good.

My advice? You had better have a Plan B in place!