Washington - Insurers are urging Congress to preserve a federal anti-trust exemption granted to the industry in 1945. The exemption has come under scrutiny by legislators in the aftermath of Hurricane Katrina, insurance trade associations say.
The Insurance Industry Competition Act, proposed legislation to end the exemption, "would level the playing field so that insurance companies must abide by the same competition laws as every other industry," says U.S. Sen. Patrick Leahy, D-Vt., chairman of the Judiciary Committee and a sponsor of the bill. Similar legislation is pending in the House.
Although the proposed law would give the federal government the power to pursue anit-trust cases against insurance companies, it would not establish a federal charter to replace state regulation in other insurance matters, published reports say.
Losing the anti-trust exemption would harm small- and medium-sized insurance carriers that cut costs by pooling information on risk, according to insurance industry trade associations. "Federal lawmakers should reject calls to revamp or further regulate the insurance industry and instead allow the system to function as it's currently designed," says the National Association of Mutual Insurance Companies (NAMIC), which has offices in Indianapolis and Washington, D.C.
Many in the insurance business see the proposals to end the exemption as a reaction to controversy surrounding insurance claims related to Hurricane Katrina in 2005. Industry associations that have banded together to express that view and argue for continuation of the exemption include NAMIC, the American Insurance Association (AIA), Washington; the Insurance Information Institute (III), New York; and the Property Casualty Insurers Association of America (PCI), Des Plaines, Ill.
A report from that group quotes Robert Hartwig, president and chief economist of the III as saying insurance companies have settled, without dispute, nearly all of the 1.7 million claims totaling $40.6 billion from Hurricane Katrina.
Some 15,000 insurance adjusters traveled to Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee after Katrina swept through a 1,400-mile swath of the southeastern United States, says Hartwig. Many of those adjusters disbursed rebuilding funds to policyholders on the spot, he says.
Less than 2% of homeowners insurance claims in Louisiana and Mississippi are in mediation or litigation, the associations say.
"While we're sympathetic to the small percentage of Gulf Coast homeowners whose claims are still in dispute, we believe the current regulations and laws are sufficient to protect policyholders' rights," says Justin Roth, NAMIC's senior director of federal affairs.
Sponsoring the Senate bill with Leahy are Sen. Arlen Specter, R-Pa.; Senate Majority Leader Harry Reid, D-Nev., and Senate Republican Whip Trent Lott, R-Miss. Companion legislation in the House is sponsored by Reps. Peter DeFazio, D-Ore.; Gene Taylor, D-Miss.; Bobby Jindal, R-La.; Charlie Melancon, D-La.; Rodney Alexander, R-La., and Walter Jones, R-N.C.
Sources: NAMIC, AIA, III, PCI, Sen. Patrick Leahy
