WASHINGTON—Lawmakers moved to rein in the insurance industry Thursday by introducing legislation in the House of Representatives and Senate to repeal the industry's federal antitrust exemption.
Senate Minority Whip Trent Lott, R-Miss., a fierce critic of the insurance industry's response to Hurricane Katrina, joined Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., and ranking member Sen. Arlen Specter, R-Pa., on the Senate floor to introduce the bill. In the House, Rep. Gene Taylor, D-Miss., Rep. Pete DeFazio, D-Ore., Rep. Bobby Jindal, R-La., Rep. Walter Jones, R-N.C., and others announced the introduction of identical legislation.
"Federal oversight would provide confidence that the industry is not engaging in the most egregious forms of anti-competitive conduct—price-fixing, agreements not to pay and market allocations," Leahy said. "Insurers may object to being subject to the same antitrust laws as everyone else, but if they are operating in an honest and appropriate way, they should have nothing to fear."
Lott, who lost his home in the hurricane and who's part of a lawsuit that's being settled with State Farm & Casualty Co., said, "After Hurricane Katrina we learned a lot of lessons." He said he found out "to my absolute horror that the insurance industry is not covered by the antitrust laws."
"This is wrong," Lott concluded, "and the Senate, in a bipartisan way, should, and I believe will, correct it."
The bill has some heavy hitters behind it, notably Senate Majority Leader Harry Reid, D-Nev., who said in a 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."
Taylor, who also lost his home and is part of the State Farm settlement, said in an interview that "the insurance industry is the only industry exempt from the laws intended to protect consumers."
The Insurance Industry Competition Act of 2007 would bring insurers under the scrutiny of the Justice Department and the Federal Trade Commission by lifting the exemption they currently have under the McCarran-Ferguson Act of 1945. States would continue to regulate insurance companies, but federal agencies would have authority to review any "unfair methods of competition," such as price-fixing.
The industry is opposed to the bill, arguing that a change in regulatory oversight needs to include a look at the 50-state system insurers operate in.
"Any discussion about repealing the antitrust exemption has to include a discussion about modernizing state regulation," said Dennis Kelly, a spokesman for the American Insurance Association. The exemption, he added, is very narrow. "The problem is hurricanes, not insurance companies," Kelly said.
The bill is the latest effort by lawmakers to bring the insurance industry to task for refusing to pay claims of wind damage from Katrina by blaming water damage, which is covered by the federal government's flood insurance program. Taylor last week introduced "multiple perils" legislation to give residents coverage of wind and water damage.
Reacting to the announcement that State Farm won't write new policies in Mississippi, Taylor said, "I think this is a marketing gimmick."
By "winking at its competitors," Taylor predicted that State Farm would resume writing policies in a few months at much higher rates. As for the timing of the announcement, on the heels of a settlement agreement, Taylor said, "It was intentionally timed by State Farm to rub it in people's faces."
The refusal of insurers to pay off policyholders after the hurricane is motivating Taylor now.
"I personally believe that the Big Three insurers said, `Let's don't pay claims' after Katrina," Taylor said. "It's wrong. Unfortunately, it's legal. But it ought to be illegal."
(c) 2007, McClatchy-Tribune Information Services.
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