Don't Kill Antitrust Exemption, Insurers Warn Congress

WASHINGTON--Eight insurance company trade groups and the U.S. Chamber of Commerce have written a strongly worded letter urging Congress to oppose legislation eliminating their industry's limited antitrust exemption.

They voiced their opposition to repeal of the McCarran-Ferguson Act in a letter delivered late Friday to all senators and representatives, which warned that repeal would ultimately reduce competition and create a swamp of regulations.

"We are writing to express our strong opposition to S. 618 and H.R. 1081," the letter said. "These recently introduced bills would repeal the state insurance regulation provisions of the McCarran-Ferguson Act that are designed to prevent federal antitrust lawsuits from undercutting state insurance and antitrust laws," it continued.

Their letter would appear to confirm the assessment of Sen. Bill Nelson, D-Fla., concerning the depth of the industry's opposition to the bills.

Sen. Nelson, a former insurance commissioner, said Tuesday at a press conference concerning insurance legislation that property-casualty and life insurers "would fight to the death" to retain McCarran-Ferguson.

The organizations in their letter said, "Current proposals being advanced in the Senate and House Judiciary Committees to repeal the McCarran-Ferguson Act's antitrust provisions would create an inconsistent and unpredictable multilayered morass of state and federal insurance rules."

"Moreover, repealing McCarran-Ferguson in the name of 'competition' would almost certainly result in new anticompetitive regulation by the states that, ironically, will reduce competition, thus thwarting the basic purpose of the federal antitrust laws: the promotion of competition in a free-market environment," the letter added.

Equally important, the letter said, "the resulting confusion and uncertainty would lead to costly litigation that would not benefit insurance consumers and would further destabilize the private market."

The letter was signed by all life and property-casualty underwriter and agent insurance groups based in Washington except for the National Association of Insurance and Financial Advisers and the Alliance for Advanced Life Underwriting.

Specifically, those signing the letter included the American Insurance Association, the Chamber of Commerce of the United States, the Council of Insurance Agents and Brokers, the Financial Services Roundtable, and the Independent Agents and Brokers of America.

Also signing were the National Association of Mutual Insurance Companies, the National Association of Professional Insurance Agents, the Property Casualty Insurers Association of America, the Reinsurance Association of America and the American Council of Life Insurers.

The effort to repeal McCarran-Ferguson is being led by members of Congress displeased with the industry's handling of claims resulting from Hurricanes Katrina and Rita in 2005.

Other supporters include the leadership of the Senate Judiciary Committee, which last year saw the insurance industry lobby thwart their efforts to set up an asbestos injury fund to handle workplace exposure claims.

The letter to members of Congress says that The McCarran-Ferguson Act creates a "limited exemption from federal antitrust laws to the extent that the business of insurance--not the business of insurance companies--is regulated by the states."

McCarran-Ferguson, according to the trade groups, "does not grant insurers blanket immunity from federal antitrust laws, as some have suggested, and it does not shield from those laws those who engage in boycotts, intimidation, or coercion. Courts consistently have construed McCarran's antitrust protection narrowly."

Their letter goes on to state that under the regulatory regime that arose from the McCarran-Ferguson Act, more than 5,000 insurers across the country are subject to a comprehensive and pervasive regimen of state-based regulation and antitrust enforcement.

"States regulate virtually every aspect of insurance, including licensing, market conduct, financial solvency, policy language, underwriting standards and the price that insurers can charge for their policies," the letter said. "Thus, federal action to repeal or amend the McCarran-Ferguson Act is unnecessary to pursue any allegations of anticompetitive behavior."

The letter concluded by saying, "We, therefore, urge you to oppose the current bills that would repeal the antitrust provisions of the McCarran-Ferguson Act, and work with various stakeholders--including insurers, regulators, policyholders and state legislators--to enhance stable, competitive insurance markets."