The National Conference of Insurance Legislators has urged theU.S. Senate Judiciary Committee to “proceed with caution” inconsidering legislation to repeal the insurance industry's limitedantitrust exemption.

At issue is S.618–the Insurance Industry Competition Act of2007–eliminating the McCarran-Ferguson Act's exemption forinsurers, which NCOIL warned would have negative consequences.

S.618 was introduced by Senate Judiciary Committee Chair Sen.Patrick Leahy, D-Vt., with cosponsors including Sen. Trent Lott,R-Miss.; Mary Landrieu, D-La.; Harry Reid, D-Nev.; and Sen. ArlenSpecter, R-Pa. Copies of the letter were sent to the bill'ssponsors.

While commending the committee's intentions, the letter notesthat the McCarran-Ferguson exemption is “not a loophole throughwhich bad actors can evade antitrust requirements. Nothing in theact restricts federal prosecutors from enforcing federal lawsrelated to boycotts, intimidation, or coercion.”

The April 6 letter–signed by NCOIL's president, Michigan StateSen. Alan Sanborn, R-Richmond Twp.–also states that nothing in theact precludes a state attorney general from prosecuting wrongdoersunder existing state laws, as evidenced by the recent “tenacity” ofthe New York attorney general's office in exposing bid-rigging andaccount-steering by brokers and insurers.

Regarding competition, the letter expresses concern that S.618would endanger the sharing of loss history and other informationthat allows smaller and more regional insurers to operateeffectively against large companies.

“Absent these more moderately sized carriers,” the letterstated, “insurance markets would be less responsive to theavailability and affordability needs of consumers–particularly instrained markets.” Prices would go up, not down, the letterpredicts.

(At a recent hearing, Sen. Lott suggested that an exemption fromthe proposed bill might be worked out for small insurers–acompromise rejected by state regulators. See accompanying story onpage 8.)

Sen. Sanborn also wrote that should the Federal Trade Commissionenforce antitrust requirements, as S.618 would allow, “insurancecompanies would fall prey to a complicated and very likelycontradictory climate of abiding by both state and federallaws.”

Such confusion, he said, “would destabilize insurance marketsthat rely on predictability to gauge risks and price products,” andlikely would result in years of costly litigation.

Finally, the letter recognized that S.618 would call intoquestion the operations of state guaranty funds and residual marketmechanisms. These structures, the letter said, together with lawscarefully tailored to suit specific state markets, “safeguard theneeds of consumers most at risk.”

NCOIL said it distributed a similar letter to House JudiciaryCommittee Chairman John Conyers, D-Mich. (who has jurisdiction overcompanion bill H.R. 1081); Rep. Peter DeFazio, D-Ore. (sponsor ofH.R. 1081); and co-sponsors Rep. Rodney Alexander, R-La,; Rep.Bobby Jindal, R-La.; Rep. Charlie Melancon, D-La.; Rep. GeneTaylor, D-Miss.; and Rep. Walter B. Jones Jr., D-N.C.

The NCOIL letter drew praise from Neil Alldredge, vice presidentfor state and regulatory affairs at the National Association ofMutual Insurance Companies.

“Such a proactive effort is an example of reasonable thinking,rather than a knee-jerk reaction by those who seek to punish theinsurance industry,” he said. “NCOIL correctly understands thegrave, unintended consequences that would befall insuranceconsumers as well as the insurance industry by this misguidedlegislation.”

In a letter to Senate Judiciary Committee Chair Patrick Leahy,NCOIL expressed concern that S.618:

o Misinterprets the role of states in enforcing antitrustprotections.

o Would jeopardize insurer practices that promote available andaffordable coverage.

o Exposes insurance markets to uncertainty and litigation.

o Creates an environment that inadvertently disadvantagesconsumers most in need.