State Farm and Proposition 103

An article by reporter Kenneth Reich implies that State Farm is going to Washington for relief from regulatory heat in states such as California (“Insurer Backs Move in Congress for U.S. to Preempt Regulations,” Part I, July 13).

That is inaccurate and misleading.

State Farm believes insurers should compete, and that we should be allowed to compete. If Congress concludes that amending the McCarran-Ferguson Act would enhance competition, then let it remove protection from antitrust laws. All we ask is that such a move be accompanied by removal of all barriers to competition. We are saying, if Congress amends McCarran-Ferguson, which empowered the states to regulate in the first place, then it should also preempt state regulation of rates (but not necessarily all state regulation). We now operate under 51 different sets of rate regulations, and compliance with all of these results in major overhead costs, which counteract the underlying aim--to contain consumers’ insurance costs.

In reporting parts of that position, the article made it seem as if State Farm is actively seeking congressional action as a response to Proposition 103. That is untrue.

Congress itself, urged on by consumer advocates, is considering changes in the McCarran-Ferguson Act, the 1945 law that exempted insurance companies from federal antitrust laws and also placed responsibility for regulating insurance in the states.

State Farm, for one, has always behaved as if it were completely governed by federal antitrust laws and, for more than 20 years, has supported amendment of the McCarran-Ferguson Act.

Free and open competition is still the best regulator of prices--that is the fundamental lesson of the American system. By all means, let the states protect consumers against unfair and illegal business practices, while particularly guarding against insolvencies. But let the marketplace reign when it comes to providing the best products at the lowest prices.

CRANFORD A. INGHAM

Vice President, General Counsel

State Farm Auto Insurance Co.

Bloomington, Ill.