50 years ago my Father explained the McCarren Ferguson Act and the special privileges it provided for insurance carriers with State Regulation. It is an understatement to say things have changed since then. With the long list of scandals within the industry in recent days, perhaps it is time for a change to Federal Regulation. All one needs to do is look at the discord and variation of laws and regulations from State to State and the lack of uniformity in regulation of carriers. The recent bid rigging fiasco is a good example of the lack of consistant application of regulations and the complicated and inconsistent negotiated settlements among a number of state regulatory agencies. Maybe the time has come for uniform laws and regulation to apply for all states. Couched in the arguments advanced by individual State Insurance Commissioner’s arguments is “self protection” of their individual “kingdoms” and the desire to preserve their own hides and futures. During my career I also witnessed the breakdown of State Laws that prohibited outside ownership of Insurance Agencies by non-residents. Progress will happen regardless of those that would oppose it. In this writer’s opinion, it’s time to move on and introduce consistency in regulatory laws and their enforcement by eliminating individual State Regulations in favor of Federal Regulation.
I have to disagree with you on this. Repeal of insurer exemption to McCarren Ferguson may well have the opposite effect, and create monopolies within the industry. When the small and mid-size insurers cannot compete with State Farms and Allstates due to lack of shared information, they either become insolvent or close. That reduces market, thus making the big companies the only business in town. When you’re the only business in town, you are a monopoly.
Further, how would the government coordinate changes in forms, policies, rating approvals, CE requirements, licensing requirements and all those other things that go into a state insurance department? The cost would be huge. Who then will oversee such regulation?
While there are some flaws in the system, overall it has worked very well since inception.
To Sam: I can’t buy your arguments. I can’t see that Federal Regulation would eliminate or reduce competition. To the contrary, the McCarren Ferguson Act exempts Insurance Companies from Anti Trust Actions by the Federal Government. While Federal Regulation may introduce new filing requirements and some additional paper work, there is no way this additional cost could come close to a National Carrier’s filing forms and rate changes with 50 different Insurance Commissions, let alone the administrative nightmare of filing administration. Who would regulate the carriers? Probably a Federal Commission would be created, with the Anti Trust people watching over their shoulder. You talk about the formation of “monopolies”. Take a look at the number of mergers and consolidation that have occurred in the last 10 to 15 years. There are a handful of large P&C insurers now compared to a few years ago. Need I name them? The drift to mega-carriers has occurred in spite of State Regulation. Should the Federal Government determine that consolidation of insurers reach the point of “no competiton”, the “Monopolies” would be broken up as the Oil and Telephone Companies have been split apart. Your statement that things have “worked OK” with State Regulation, obviously you don’t live in Florida. I do.
Sam,
Valid point…but the critics have been just as harsh in a different, yet similar business of retail with Wal-Mart and their(monopolistic)tactics and market clout. Smaller outfits are surviving and even thriving within that sector that is as free from regulation on the state or federal level as any sector can get. Free-market capitalism, without the sheild of over-bearing and protective legislation, self corrects. It will correct itself, too, in the insurance marketplace. I assure you, I am not in support of no regulation alltogether. You will always have the deceptors and frauds in any market. Let the insurance companies have at it…it is a natural progression and evolution that must occur in the expanding free-market world — personal insurance is long over do to experience.
I too agree that Federal Regulation is much needed. The most compelling argument for chosing between a federal based regulatory agency vs. the current 50 Individual State program is which system best favors consumers. I would argue that a federal system would serve customers better. The current systems results in far too much time, effort, and money spent on compliance with 50 different systems that often have different and even contradictory approaches. While I’m sure the transition to Federal regulation wouldn’t be without its bumps, I think the long term reduction in cost that could be passed on to the consumer is well worth it.
In my opinion, supporters of state regulation are those companies and agencies that benefit from the barriers to competition that it erects.
Lastly, for anyone who is thinking about posting it, please spare me the plea that we should give state regulators more time to standardize things themselves. They have had over 50 years to do that and have made very little real progress, even when given a kick in the pants by legislation such as GLB. There is no way 50 state legislatures will ever pass identical and reciprocal laws that provide for true uniformity and the cutting of red tape that insurers need to become truly customer focused instead of regulator focused. Too many state DOI’s are interested merely in maintaining and expanding their political power more than they are concerned with legitimate customer welfare.
For those that want to preserve data sharing, the repeal of McCarran Ferguson would not necessarily end that practice. Federal anti-trust laws have safe harbors to protect practices that help consumers and I think a pretty clear and convincing argument can be made that data sharing does. Also, many federal regulatory proposals such as that from Sununu/Johnson provide insurers the option of remaining in the state regulatory system if they so desire.
Been, you too have valid points, as do the other posters. You are right, I don’t live in Florida, and can see where state regulation is a problem from that perspective. I certainly do not agree or support the antics and actions currently going on in Florida, as it will certainly crash and burn in the event of a catasrophic hurricane season.
All of you posters have certainly given me some food for thought. Thank you.
Sam: You are a gentleman compared to many who post comments on this BLOG. You do not resort to name calling and demeaning remarks to those who disagree with your position and I appreciate that. Regardless of our individual beliefs, I believe change is coming. The timing of it is yet to be determined. We are now a global economy and state borders are no longer a hindrance to the conduct of business across State Lines as it once was when I entered the Agency Business in 1955. While we weren’t traveling by horse and buggy, we conducted business in a comparable fashion. McCarren Ferguson goes back before 1955, I believe into the 30’s Protectionism was strong factor in those days to fend off competitors from other states. With the advent of corporate franchises, thousand of businesses with offices in 50 states, simplification and standardation of regulatory rules and regulations have promise to reduce cost, assure equality in coverage and equitable determination of rates. Competition will not be squelched as feared. Not mentioned yet are insolvency funds. It is my speculation that with Federal Regulation and the US Government involved, a form of Federal Insolvency protection may well be established, which if created would provide standardized protection to policyholders perhaps similar to Federal Deposit Insurance. Who knows, it may also provide protection for non-admitted carriers which is another area of concern to policyholders under present State Regulation.
“Take a look at the number of mergers and consolidation that have occurred in the last 10 to 15 years. There are a handful of large P&C insurers now compared to a few years ago. Need I name them?”
I say to you, “Name them, and the be sure to include the prior and current company names.”
Where are all the conservatives when you think we’d need them? if there is one thing about this issue that bothers me, it is the assumption that the FEDERAL goverment can do this better! What about getting government off the backs of the people? Why opt for the creation of yet another government boondoggle, another layer of expected burgeoning bureaucracy? This is just trading one set of evils for another….I say “better the devil you know, than the one you don’t” and just leave things alone. You can get pretty good using an old beat up tool better than a spanking brand new one….
As respects state regulation of insurance: how does it accommodate insurance claimants in one state complaining against coverage of an insurance company based and regulated in another state? What if the insurance company in the other state turns out to be unknown to the NAIC and also unknown to the Insurance Commissioner in the state from which it is operating? How does a covered person in another state seek redress for coverage that actually is illegal? Please advise. Thanks.
Where are all the conservatives on this one? Conservatives like one thing more than they hate big government — they love big business and the lobby money that comes from it. In this case, it’s the biggest P&C insurers behind the repeal. They get the most benefit and are chomping at the bit to complete the oligopoly.
This was a Republican concession that favored the insurance lobbyists in 1946, which destroyed our once number one ranked healthcare nonprofit single prepayment system that was not a profit insurance system. I met with President Ford as a healthcare administrator and several senatore to stop this but failed. If haelthcare is ever to recover from this tragic assault on on sick and disabled it must be repealed.
50 years ago my Father explained the McCarren Ferguson Act and the special privileges it provided for insurance carriers with State Regulation. It is an understatement to say things have changed since then. With the long list of scandals within the industry in recent days, perhaps it is time for a change to Federal Regulation. All one needs to do is look at the discord and variation of laws and regulations from State to State and the lack of uniformity in regulation of carriers. The recent bid rigging fiasco is a good example of the lack of consistant application of regulations and the complicated and inconsistent negotiated settlements among a number of state regulatory agencies. Maybe the time has come for uniform laws and regulation to apply for all states. Couched in the arguments advanced by individual State Insurance Commissioner’s arguments is “self protection” of their individual “kingdoms” and the desire to preserve their own hides and futures. During my career I also witnessed the breakdown of State Laws that prohibited outside ownership of Insurance Agencies by non-residents. Progress will happen regardless of those that would oppose it. In this writer’s opinion, it’s time to move on and introduce consistency in regulatory laws and their enforcement by eliminating individual State Regulations in favor of Federal Regulation.
I have to disagree with you on this. Repeal of insurer exemption to McCarren Ferguson may well have the opposite effect, and create monopolies within the industry. When the small and mid-size insurers cannot compete with State Farms and Allstates due to lack of shared information, they either become insolvent or close. That reduces market, thus making the big companies the only business in town. When you’re the only business in town, you are a monopoly.
Further, how would the government coordinate changes in forms, policies, rating approvals, CE requirements, licensing requirements and all those other things that go into a state insurance department? The cost would be huge. Who then will oversee such regulation?
While there are some flaws in the system, overall it has worked very well since inception.
To Sam: I can’t buy your arguments. I can’t see that Federal Regulation would eliminate or reduce competition. To the contrary, the McCarren Ferguson Act exempts Insurance Companies from Anti Trust Actions by the Federal Government. While Federal Regulation may introduce new filing requirements and some additional paper work, there is no way this additional cost could come close to a National Carrier’s filing forms and rate changes with 50 different Insurance Commissions, let alone the administrative nightmare of filing administration. Who would regulate the carriers? Probably a Federal Commission would be created, with the Anti Trust people watching over their shoulder. You talk about the formation of “monopolies”. Take a look at the number of mergers and consolidation that have occurred in the last 10 to 15 years. There are a handful of large P&C insurers now compared to a few years ago. Need I name them? The drift to mega-carriers has occurred in spite of State Regulation. Should the Federal Government determine that consolidation of insurers reach the point of “no competiton”, the “Monopolies” would be broken up as the Oil and Telephone Companies have been split apart. Your statement that things have “worked OK” with State Regulation, obviously you don’t live in Florida. I do.
Sam,
Valid point…but the critics have been just as harsh in a different, yet similar business of retail with Wal-Mart and their(monopolistic)tactics and market clout. Smaller outfits are surviving and even thriving within that sector that is as free from regulation on the state or federal level as any sector can get. Free-market capitalism, without the sheild of over-bearing and protective legislation, self corrects. It will correct itself, too, in the insurance marketplace. I assure you, I am not in support of no regulation alltogether. You will always have the deceptors and frauds in any market. Let the insurance companies have at it…it is a natural progression and evolution that must occur in the expanding free-market world — personal insurance is long over do to experience.
I too agree that Federal Regulation is much needed. The most compelling argument for chosing between a federal based regulatory agency vs. the current 50 Individual State program is which system best favors consumers. I would argue that a federal system would serve customers better. The current systems results in far too much time, effort, and money spent on compliance with 50 different systems that often have different and even contradictory approaches. While I’m sure the transition to Federal regulation wouldn’t be without its bumps, I think the long term reduction in cost that could be passed on to the consumer is well worth it.
In my opinion, supporters of state regulation are those companies and agencies that benefit from the barriers to competition that it erects.
Lastly, for anyone who is thinking about posting it, please spare me the plea that we should give state regulators more time to standardize things themselves. They have had over 50 years to do that and have made very little real progress, even when given a kick in the pants by legislation such as GLB. There is no way 50 state legislatures will ever pass identical and reciprocal laws that provide for true uniformity and the cutting of red tape that insurers need to become truly customer focused instead of regulator focused. Too many state DOI’s are interested merely in maintaining and expanding their political power more than they are concerned with legitimate customer welfare.
For those that want to preserve data sharing, the repeal of McCarran Ferguson would not necessarily end that practice. Federal anti-trust laws have safe harbors to protect practices that help consumers and I think a pretty clear and convincing argument can be made that data sharing does. Also, many federal regulatory proposals such as that from Sununu/Johnson provide insurers the option of remaining in the state regulatory system if they so desire.
Been, you too have valid points, as do the other posters. You are right, I don’t live in Florida, and can see where state regulation is a problem from that perspective. I certainly do not agree or support the antics and actions currently going on in Florida, as it will certainly crash and burn in the event of a catasrophic hurricane season.
All of you posters have certainly given me some food for thought. Thank you.
Sam: You are a gentleman compared to many who post comments on this BLOG. You do not resort to name calling and demeaning remarks to those who disagree with your position and I appreciate that. Regardless of our individual beliefs, I believe change is coming. The timing of it is yet to be determined. We are now a global economy and state borders are no longer a hindrance to the conduct of business across State Lines as it once was when I entered the Agency Business in 1955. While we weren’t traveling by horse and buggy, we conducted business in a comparable fashion. McCarren Ferguson goes back before 1955, I believe into the 30’s Protectionism was strong factor in those days to fend off competitors from other states. With the advent of corporate franchises, thousand of businesses with offices in 50 states, simplification and standardation of regulatory rules and regulations have promise to reduce cost, assure equality in coverage and equitable determination of rates. Competition will not be squelched as feared. Not mentioned yet are insolvency funds. It is my speculation that with Federal Regulation and the US Government involved, a form of Federal Insolvency protection may well be established, which if created would provide standardized protection to policyholders perhaps similar to Federal Deposit Insurance. Who knows, it may also provide protection for non-admitted carriers which is another area of concern to policyholders under present State Regulation.
B.A.T.L.,
“Take a look at the number of mergers and consolidation that have occurred in the last 10 to 15 years. There are a handful of large P&C insurers now compared to a few years ago. Need I name them?”
I say to you, “Name them, and the be sure to include the prior and current company names.”
Been, thanks for your kind comments, but I am not a gentleman…a gentlewoman perhaps.
Where are all the conservatives when you think we’d need them? if there is one thing about this issue that bothers me, it is the assumption that the FEDERAL goverment can do this better! What about getting government off the backs of the people? Why opt for the creation of yet another government boondoggle, another layer of expected burgeoning bureaucracy? This is just trading one set of evils for another….I say “better the devil you know, than the one you don’t” and just leave things alone. You can get pretty good using an old beat up tool better than a spanking brand new one….
RE: RE: RE: RE: Repeal of McCarren Ferguson Act
As respects state regulation of insurance: how does it accommodate insurance claimants in one state complaining against coverage of an insurance company based and regulated in another state? What if the insurance company in the other state turns out to be unknown to the NAIC and also unknown to the Insurance Commissioner in the state from which it is operating? How does a covered person in another state seek redress for coverage that actually is illegal? Please advise. Thanks.
Where are all the conservatives on this one? Conservatives like one thing more than they hate big government — they love big business and the lobby money that comes from it. In this case, it’s the biggest P&C insurers behind the repeal. They get the most benefit and are chomping at the bit to complete the oligopoly.
This was a Republican concession that favored the insurance lobbyists in 1946, which destroyed our once number one ranked healthcare nonprofit single prepayment system that was not a profit insurance system. I met with President Ford as a healthcare administrator and several senatore to stop this but failed. If haelthcare is ever to recover from this tragic assault on on sick and disabled it must be repealed.