Re: U.S. House Bill Would Repeal Mccarran-Ferguson

DATE:MARCH 20, 2009

TO: NCOIL LEGISLATORS

FROM: SUSAN NOLAN

NCOIL EXECUTIVE DIRECTOR

RE: U.S. HOUSE BILL WOULD REPEAL MCCARRAN-FERGUSON

ANTITRUST EXEMPTION

Below, please find web-links to the following articles and information:

Bill Would Repeal Insurers’ Antitrust Shield (3/19 National Underwriter)

Reps. Defazio, Taylor Defend Taxpayers from Further AIG and Insurance Industry Greed(3/19 Congressman Taylor Press Release)

NCOIL Resolution in Opposition to Amending or Repealing the McCarran-Ferguson Act(7/2007 NCOIL)

The proposed legislation is available at:

http://www.thomas.gov/cgi-bin/query/z?c111:H.R.1583:

Congressmen Peter DeFazio (D-OR) and Gene Taylor (D-MS)—along with four colleagues—yesterday reintroduced legislation to repeal the antitrust exemption granted to insurance companies by the McCarran-Ferguson Act. H.R. 1583, the Insurance Industry Competition Act, was introduced with Congressmen Brian Baird (D-WA), Phi Hare (D-IL), Jerrold Nadler (D-NY), and Congresswoman Marcy Kaptur (D-OH).

NCOIL POSITION

NCOIL historically has opposed any effort to repeal the McCarran-Ferguson Act, the bedrock of state insurance regulation (see resolution above). In 2007, NCOIL argued that the McCarran-Ferguson exemption is not a loophole through which bad actors can evade antitrust requirements, and its repeal would

stifle competition by preventing insurer practices, such as sharing of information

create a bifurcated system and spawn a confusing and litigious regulatory environment

endanger guaranty funds and residual market mechanisms

In the past we have voiced our concern that any run at McCarran-Ferguson is likely to open the door to more federal interference down the road.

H.R. 1583

While not repealing the provision granting the states authority to regulate “the business of insurance,” the half-page bill would amend the McCarran-Ferguson Act to:

repeal the antitrust exemption granted for the business of insurance

grant the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) authority to apply U.S. antitrust laws to insurer “unfair methods of competition”

apply the Federal Trade Commission Act to the business of insurance—in areas outside anticompetitive behavior— “to the extent that such business is not regulated by state law”

authorize the DOJ and FTC to issue joint statements of their antitrust enforcement policies

BILL INTRODUCTION & STATUS

In an effort to spur his bill’s chances of success by hitching it to the financial crisis bandwagon, Congressman Taylor said, “This legislation is particularly important in light of the abuses by American Insurance Group (AIG), operating as if they were above the law. In fact, the current insurance exemption from antitrust laws gave AIG a free pass to become “too big to fail,” and now the U.S. taxpayers are on the hook to bail them out or risk even further turmoil in an already fragile economy.”

The legislation has been referred to the House Committees on the Judiciary, Financial Services, and Energy and Commerce.The bill was also introduced in 2007 and never moved.

OPPOSITION/SUPPORT

Groups that joined NCOIL in opposing this legislation in 2007 included the National Association of Professional Insurance Agents (PIA), the Independent Insurance Agents & Brokers of America (“Big I”), the National Association of Mutual Insurance Companies (NAMIC), the American Insurance Association (AIA), and the Insurance Services Office (ISO), among many others in the insurance industry.

Proponents of the legislation included the National Association of Attorneys General (NAAG), the American Bar Association (ABA)—who suggested replacing the exemption with certain safe harbors—and various consumer groups, such as the Consumer Federation of America (CFA), among others.

Feel free to contact me by reply e-mail or at 518-687-0178 or to contact Mike Humphreys at or at 202-220-3014.