Keep McCarran-Ferguson, NAIC Urges Panel

Industry officials believe Mr. Specter's bill was a reaction to insurers' unwillingness to unite behind a measure he sponsored to create a system of alternative claims processing resolution for people injured by exposure to asbestos in the workplace. The bill was blocked on the Senate floor earlier this year.

And, Sen. Trent Lott, R-Miss., upset about how the industry dealt with settlement of flood and wind claims stemming from Hurricane Katrina, reportedly plans to introduce legislation limiting the industry's antitrust exemption in the next Congress.

At the same time, legislation has been introduced in both the House and the Senate that would create an optional federal charter for insurance that would include a provision ending rate regulation for insurers and effectively repealing the law.

Mr. McRaith's testimony didn't deal directly with the latest challenges to state regulation of insurance, but did defend the current industry regulatory scheme.

"McCarran's limited antitrust exemption permits supervised cooperative activities by insurers to work in concert with comprehensive, cradle-to-grave consumer protections to promote competition, enhance consumer choice and help maintain marketplace integrity," Mr. McRaith said.

"Discussions of its repeal must be considered in the broad economic context and cannot be viewed in a legalistic vacuum," he added.

Mr. McRaith noted in his testimony that the core priority of state insurance officials is to protect consumers.

He also highlighted what he termed "the unique characteristics of insurance," which he said warrant special consideration under federal antitrust laws and make comparisons to other financial sector products "inherently misleading."

State law and supervision, he said, provide active oversight of insurers' cooperative endeavors and prohibit anticompetitive behavior.

"The third-party organizations involved with cooperative activities are licensed, structured and regulated to be consistent with state law," Mr. McRaith said.

"Price-fixing, bid-rigging, tying, boycotting or any practice that undermines competition is simply not allowed and is subject to prosecution by state insurance officials and law enforcement personnel," he said.

Mr. McRaith is chairman of the NAIC's Broker Activities Task Force, formed in response to revelations by New York Attorney General Eliot Spitzer of widespread bid-rigging and other anticompetitive practices in commercial insurance sales involving large brokers and insurers.

In his testimony before the panel, Mr. McRaith outlined the NAIC's efforts to combat illegal activities by promoting broker compensation transparency; to coordinate multistate investigations of brokers' and insurers' business practices; and to ease the process of providing anonymous "tips" to alert insurance officials of unlawful or unscrupulous behavior.

"NAIC members have worked on these issues with attorneys general from around the nation, and have guided resolutions that have returned more than $1 billion to policyholders and imposed business reforms that honor consumer protections," Mr. McRaith said.

"The NAIC looks forward to continued work with federal and state officials, consumers, large and small industry participants, and other interested parties to prevent and punish anticompetitive practices," he said.