Senate Reviews McCarran-Ferguson Act, Insurance Reform LegislationPosted 8/18/2006
By Robert L. Redding, Jr.
The U.S. Senate Judiciary Committee held its first hearing on the McCarran-Ferguson Act since 1989, according to Arlen Specter, committee chairman, R-Pa. The McCarran-Ferguson Act was enacted in 1945 to permit the states to continue regulating the insurance business. Under the Act, the business of insurance is exempt from some federal antitrust statutes to the extent that it is regulated by the states.
The Automotive Service Association supports the repeal or modification of the McCarran-Ferguson Act.
Senate Judiciary Committee witnesses included:
U.S. Sen. Patrick Leahy, D-Vt., ranking member of the Judiciary Committee, commented in his opening statement: "If insurers around the country are operating in an honest and appropriate way, they should not object to being answerable under the same federal antitrust laws as virtually all other businesses. American consumers, from sophisticated multinational businesses to individuals shopping for personal insurance, have the right to be confident that the cost of their insurance reflects competitive market conditions, not collusive behavior. I recognize that the insurance industry has unique characteristics, including the dependence on collective claim and loss data, but I am confident that we can accommodate those legitimate needs while still providing federal regulators with the tools to investigate and prevent collusion and other anticompetitive behavior. Individuals and businesses are compelled, sometimes by the law and sometimes by prudence, to purchase many kinds of insurance. We must ensure that those citizens are being treated fairly, and that the providers of the product are not stifling competition in the marketplace."
Racicot led off the testimony by telling the committee, "We believe congressional review of the state insurance regulatory system is long overdue, including frank and honest examination of the economic utility of government price controls and the regulation of insurance policy forms. In addition, we note that there is a growing understanding in Congress about the very real problems associated with the current state-based regulatory regime - and that steps must be taken to improve and modernize the way insurance is regulated."
Hunter told the committee that CFA urges the Senate to repeal the antiquated, unnecessary and harmful insurance antitrust exemption for the benefit of the nation's consumers. Hunter said, "We estimate that elimination of the exemption will save consumers at least 10 percent of the current premiums, or about $45 billion a year."
The Senate Banking, Housing and Urban Affairs Committee has also begun a series of hearings on insurance regulation. Sen. Richard Shelby, R-Ala., Senate banking chair, kicked off the hearings with a goal of the committee understanding the most pressing insurance regulatory reform issues and the potential options for "modernizing our system of insurance regulation."
This first hearing included numerous insurance industry organization representatives.
Much of the hearing's discussion revolved around the National Insurance Act of 2006, which was introduced by two members of the committee, Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D. For a summary of this legislation, go to www.TakingTheHill.com.
White, testifying for the Property and Casualty Insurers Association of America, said: "Even considering where the regulatory system stands today and of the lack of progress in reform over the past four years, PCI strongly urges Congress to move with caution in considering changes to insurance regulation. PCI supports the state regulatory system, and we would like to see [the] state system improved. Any reform proposals must take into account that insurance is a major part of the U.S. economy and a complex market that has evolved over time. We urge careful consideration of potential unintended consequences of changes before any actions are taken."
At the Senate Banking Committee hearing, the Consumer Federation of America critiqued insurance reform legislation now being considered before the House and the Senate. Plunkett commented, "Insurers want competition alone to determine rates, they say. How about a simple repeal of the antitrust exemption in the McCarran-Ferguson Act to test their desire to compete under the same rules as normal American businesses? Another amendment to the McCarran Act we would suggest is to do what should have [been] done at the beginning of the delegation of authority to the states: have the FTC and other federal agencies perform scheduled oversight of the states' regulatory performance and propose minimum standards for effective and efficient consumer protection."
Both the Senate majority leader and the House majority leader have indicated Congress will go home by the end of September with a brief lame duck session following the November elections. If the month-long August recess is taken into account, it is unlikely comprehensive insurance reform will be seriously considered until the 110th Congress in 2007.
ASA encourages collision repairers to review insurance reform information and discuss it with peers to be prepared to dialogue with policymakers at the appropriate time.
To review the testimony or insurance reform legislation being considered in the Senate, please go to ASA's legislative Web site, www.TakingTheHill.com.
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