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Congress is Considering Eliminating Antitrust Exemptions for the Insurance Industry
Congress is Considering Eliminating Antitrust Exemptions for the Insurance Industry
First published in V&E Antitrust News & Notes, April 2009.
By Sarah Stark Legislation has been introduced into the House of Representatives that would, if passed, amend the current antitrust exemption enjoyed by providers of retail insurance under the McCarran-Ferguson Act (the Act).1 Passed in 1945, the McCarran-Ferguson Act, 15 U.S.C. §1011, affirmed the rights of the states to regulate the "business of insurance," including in the antitrust arena. The Act has effectively exempted insurers from federal antitrust regulations and, instead, has allowed them to operate under state antitrust and insurance regulations. Asserting that the McCarran-Ferguson Act has allowed insurance companies like American International Group, Inc. to become "too big to fail,"2 House
Reps. Gene Taylor, D-Mississippi, and Peter DeFazio, D-Oregon, introduced the Insurance Industry Competition Act of 2009. The proposal would eliminate the provision in the McCarran-Ferguson Act that excludes the application of the Sherman Act, Clayton Act, and Federal Trade Commission Act to the business of insurance and give the Federal Trade Commission and Department of Justice the authority to enforce federal antitrust laws against insurers.3 The proposed regulation would not eliminate state regulation of insurers, but instead would make insurers subject to state and federal antitrust laws.
While the bill’s sponsors view, the proposed legislation as a necessary step toward remedying perceived antitrust abuses in the insurance industry,4 insurers maintain that the Act in its current form increases competition and reduces insurance prices.5 Under the current system, insurers share large amounts of information about past and predicted future losses. By pooling data, insurance companies are able to obtain statistically reliable information to determine individually their risks and rates.6
Opponents of the legislation argue that it would eliminate the ability of insurers to share data, which would leave smaller insurers without sufficient information to calculate their risks and issue policies. As a result, there would be fewer insurers, which would reduce competition and cause insurance rates to rise.7This article is not intended to be legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information only. Results described herein may be subject to reconsideration or appeal. Prior results do not guarantee a similar outcome. Application of the information reported herein to particular facts or circumstances should be analyzed by legal counsel.
1Liz McKenzie, House Bill Aims to Pull Insurers' Antitrust Immunity, Law 360, Mar. 19, 2009, www.law360.com/articles/92662.
2Press Release, Congressman Gene Taylor, Reps. Defazio, Taylor Defend Taxpayers from Further AIG and Insurance Industry Greed (Mar. 19, 2009), www.taylor.house.gov.
3Insurance Industry Competition Act of 2009, HR-1583, 111th Cong. (2009).
4Press Release, Congressman Gene Taylor, Reps. Defazio, Taylor Defend Taxpayers from Further AIG and Insurance Industry Greed (Mar. 19, 2009), www.taylor.house.gov.
5Press Release, Property Casualty Insurers Association of America, PCI Opposes Repeal of McCarran-Ferguson Act (Mar. 24, 2009), available at www.insurancenewsnet.com; National Association of Mutual Insurance Companies, The McCarran-Ferguson Act (Mar. 23, 2009), www.namic.org; Insurance Information Institute, The McCarran-Ferguson Act: What It Is, What It Isn't and Consequences of Repeal of the Insurance Industry’s Limited Antitrust Exception, www.iii.org.
6Insurance Information Institute, The McCarran-Ferguson Act: What It Is, What It Isn't and Consequences of Repeal of the Insurance Industry’s Limited Antitrust Exception, www.iii.org.
7National Association of Mutual Insurance Companies, The McCarran- Ferguson Act (Mar. 23, 2009), www.namic.org; Insurance Information Institute, The McCarran-Ferguson Act: What It Is, What It Isn't and Consequences of Repeal of the Insurance Industry's Limited Antitrust Exception, www.iii.org.
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