Insurers Urge Regulators to Keep McCarran-Ferguson

June 6, 2007

Insurers recently asked state regulators to oppose a bill pending in Congress that would eliminate the exemption insurers currently receive from some federal antitrust laws.

At the National Association of Insurance Commissioners’ (NAIC) meeting in San Francisco, the Property Casualty Insurers Association of America (PCI) asked state insurance commissioners and the NAIC to be an active force in support of the McCarran-Ferguson Act.

“McCarran-Ferguson is the lynchpin to state-based insurance regulation and state regulators can be very effective in making the case for the limited antitrust exemption,” said John Lobert, senior vice president of government affairs for PCI. “By adding a strong voice behind McCarran-Ferguson, the NAIC and individual commissioners can explain how it promotes competition in the marketplace by putting small and medium-sized companies on a level playing field with much larger competitors. It is important for Congress to understand that it also creates efficiencies for insurers that translate into savings and choice for insurance buyers.”

The McCarran-Ferguson Act was enacted by Congress in 1945. Cooperative actions that are essential to the nature of insurance are exempted from federal antitrust laws only where they are actively regulated by the states, according to PCI. McCarran-Ferguson preserves key insurer practices under state insurance regulation that are in the public’s interest. For example, it allows collective loss-cost data aggregation and ratemaking, standard policy forms and pools or residual markets. These efficiencies could not occur without McCarran-Ferguson, the association said.

The group believes repealing McCarran-Ferguson would create an additional layer of federal regulation and drive up administrative and legal costs for insurers. Insurers would face onerous costs for data analysis that they can currently share. Small to mid-sized insurers, with smaller cash reserves, would be particularly hard hit by these costs, and it is conceivable that many of these insurers would not remain solvent, PCI said in a statement.

“PCI is also actively urging Congress not to pass S. 618,” Lobert said. “The current system of insurance regulation under McCarran has worked well for over 60 years, with established case law and interpretation giving business the certainty needed to engage in the activities surrounding insurance. Insurance is a complex and comprehensive system of consumer protections, evolved over many years, addressing solvency, availability and other elements. Senate Bill 618 would replace it with higher costs to the consumer resulting from uncertainty, a reduction in competition and increased risk for participating in the market.”

Source: NAIC, PCI

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