FTC Questions Insurance Antitrust Exemption

The chairman of the Federal Trade Commission said Wednesday that the insurance industry’s 40-year-old exemption from U.S. antitrust laws has hurt consumers and allowed the industry to fix prices in many states.

Daniel Oliver stopped just short of calling for repeal by Congress of the McCarran-Ferguson Act, which established the exemption, but he said he could not understand how anyone could argue for it “with a straight face.”

In a speech to state insurance commissioners and hundreds of industry leaders meeting here, he noted that insurance is an industry that collects more than $300 billion in premiums each year.

Yet, he complained, Congress will not even allow his agency to initiate studies of the industry’s practices. It can study only what congressional committees tell it to, and they seldom if ever tell it to study anything relating to insurance, Oliver said.

In the meantime, he said, insurance has fallen into a crisis centering on high prices and lack of availability of some types of coverage.

He added that repealing the antitrust exemption would either force the states--the sole regulators of insurance now--to spur more competition among companies or would quickly lead to federal regulation.

“Would this be bad?” the trade commissioner asked. “Is federal regulation worse than state regulation?”

“Repeal would make a difference,” Oliver said. “In many states, there would be a public spotlight on agreements that exist now, usually out of public view, that allow companies to fix prices and restrict the kinds of insurance products they market.

“Consumers generally suffer when companies restrain or are forced by state regulation to restrain competition,” he declared. Oliver joked that he really did not know much about insurance because he was barred from studying it. Yet there could be no mistaking the underlying seriousness of what amounted to a call for reopening the whole question of how the insurance industry is regulated in the United States.

Reaction to Oliver’s remarks appeared to be mixed among insurance executives who joined him in a lengthy panel discussion after he spoke.

At the outset of the discussion, moderator Edwin S. Overman, president of the Insurance Institute of America, asked all those who agreed with Oliver to stand up. Of the several hundred present, only one rose to his feet.

Some Acceptance

But the heads of two insurance companies who were on the panel said they believed that sentiment had begun to increase within the industry for replacing some state regulation with federal regulation.

“There is a growing feeling that maybe there is some merit in federal regulation, because of the unevenness in state regulation,” said Ian M. Rolland, president of the Lincoln National Corp. “There is onerous rate regulation in some states,” he explained. “There are slow licensing procedures in others, and there’s a lot of frustration in the industry.”

“I sense such feeling too,” said Jack B. Riffle, chairman of the Utica National Insurance Group. “Some of us are driven to that by some of our state experiences.”

However, neither Riffle nor Rolland, nor any other insurance man who spoke, endorsed repeal of the antitrust exemption.

Several state insurance commissioners who commented on Oliver’s remarks were all opposed to any suggestion of federal regulation replacing state regulation.

Worth Consideration

However, a New York state legislator on the panel, Sen. John Dunne, said the insurance industry should realize that Congress may at least consider changes in federal insurance law, including repealing the antitrust exemption, in the coming session.

With the Democrats taking control in the Senate, Dunne said, “The industry has to be aware there is going to be greater public scrutiny of insurance. Rather than have the Federal Trade Commission conduct the inquiry, I think it would be better to have Congress do it.”