Lott Suggests An Antitrust Pass For Small Insurers

WASHINGTON–Sen. Trent Lott, R-Miss., suggested at a committee hearing today that legislation he supports to repeal the anti-trust exemption for insurers could be modified to exempt small carriers.

The lawmaker, speaking at a session of the Senate Commerce Committee, said his bill to end insurers' limited anti-trust exemption under the McCarran-Ferguson Act could provide a “safe harbor” from anti-trust laws for small insurers with $2 billion or less of insurance in place.

Repeal of the insurance industry's antitrust exemption under McCarran-Ferguson is among several bills Sen. Lott has proposed to “fix some of the problems” he finds with the insurance industry as a result of its handling of claims resulting from Hurricanes Katrina and Rita in 2005.

Another bill he talked about at the hearing is S. 545, legislation which would require VIN-based disclosure for all totaled vehicles by the industry through a database the industry would be forced to maintain.

Discussing the antitrust legislation, the senator accused large insurers of “hiding behind” small insurers in seeking to retain their current anti-trust exemption.

In Mr. Lott's view, the “big insurers” are claiming that repeal of McCarran-Ferguson would inordinately affect smaller insurers who need to have access to pooled claims and other data.

In his comments, Sen. Lott termed the insurance industry's conduct in handling hurricane claims “outrageous, arrogant and mean-spirited.” He is currently suing State Farm in a dispute over a claim he submitted for destruction of his Pascagoula, Miss., home by Katrina.

He said that Mississippi State Attorney General Jim Hood had “a lot of evidence of misconduct and fraud” by State Farm in considering criminal charges against the company, but decided instead on a more “practical solution.”

In his own testimony before the committee, Attorney General Hood said he reached a class settlement for homeowners with State Farm after curtailing a grand jury probe of the insurer because the company told him it would pull completely out of Mississippi if it was indicted.

Because the firm is by far Mississippi's largest insurer, the state would be hurt because it would have been difficult to find alternative insurance capacity, he said.

Both Sen. Lott and Mr. Hood cited recent revelations by a North Carolina firm that State Farm had threatened to fire an engineering concern it hired to inspect storm-damaged homes in Mississippi and Louisiana.

The Associated Press reported today it had evidence that management of the engineering firm “suggested in e-mails that the insurer was dissatisfied with how it was reporting damage.”

Only a few members of the committee attended the hearing, chaired by Sen. Mark Pryor, D-Ark., who noted in his opening remarks that no insurer or insurance company trade group choose to testify. They were unwilling to sit still for a grilling by Sen. Lott, Sen. Pryor suggested.

A senior insurance trade group lobbyist said that was not the case. The lobbyist, who asked not to be named out of concern for retaliation, noted that a number of insurance trade groups testified at a companion hearing on the anti-trust issue being held at the same time by the Senate Banking Committee.

“Historically, the Senate Banking Committee has claimed primacy over insurance issues,” the lobbyist said, “and participating in a hearing being held at the same time by another committee would, the industry felt, be considered 'insulting' by Sen. Chris Dodd, D-Conn., the chairman, and Sen. Richard Shelby, R-Ala., the ranking minority member.”

Sen. Lott's call for repeal of McCarran-Ferguson, which was urged by Attorney General Hood and Robert Hunter, director of insurance for the Consumer Federation of America, was not echoed by other members of the Commerce Committee.

During the hearing, Sen. Pryor asked David Regan, vice president for legislative affairs for the National Association of Automobile Dealers, if a simpler solution might be available for revealing to dealers and consumers that a vehicle had been totaled.

Sen. Pryor, a former state attorney general, suggested that putting a sticker on a junked vehicle when it is resold through auction might do.

But Mr. Regan said that suggestion had been rejected several times by the Federal Trade Commission, among others, during deliberations on the issue of an appropriate consumer protection.

In his testimony, Attorney General Hood called for repeal of McCarran-Ferguson, along with a federal mandate that insurers provide all perils home coverages in all states and bar use of “anti-concurrent causation clauses” that exclude windstorm claims if flooding is involved.

Julia Benafield Bowman, Arkansas insurance commissioner, testified on behalf of the National Association of Insurance Commissioners at the hearing.

She supported retention of McCarran-Ferguson provisions that leave regulation of insurers to the states and noted that her office fields 40,000 calls annually from consumers. Consumer protection is best left to the states, she said.

Moreover, the federal government already has an appropriate role in regulating insurers, she said, citing the Terrorism Risk Insurance Act, first enacted in 2002 and up for renewal again this year. “The more state regulation we can keep, the better,” she testified.