Insurers Group Agrees to Back Reform Bill : Legislation: Reduction in antitrust protection could mean lower prices. AIA hopes action will defuse consumer anger.
The chairman of the House Judiciary Committee on Thursday announced a surprising alliance with a powerful insurance trade group to endorse legislation curtailing insurers’ 49-year-old special exemption from federal antitrust laws.
After two years of negotiations, the American Insurance Assn. has decided to back reform, “the first breach in the wall of strident opposition” from the industry, said Rep. Jack Brooks (D-Tex.). The group’s membership includes some of the giant companies of the industry, such as Aetna, Travelers, Cigna, Hartford and Kemper, that are active in selling property and casualty coverage.
Under Brooks’ bill, insurers would be allowed to continue sharing information on actual historical losses. But three years after the bill’s passage, they would no longer be allowed to engage in “trending,” or sharing projections of future losses from such things as theft, fire, floods and earthquakes. This shared information now has an important impact on setting rates.
If Congress approves the bill, the result will be “downward pressure on prices and more consumer choice,” predicted Mark Silbergeld, Washington director for Consumers Union, which helped Brooks and the AIA reach their agreement.
Brooks has twice moved similar bills through his Judiciary Committee, but he was unable to get a vote in the full House because of insurance industry opposition. The task is still difficult, but he has for the first time enlisted an important segment of the insurance business to be his ally instead of his enemy.
The AIA hopes that passage of the Brooks bill will defuse some of the consumer anger against the insurance industry and make it possible to pass other legislation eagerly sought by insurers. Removing the special antitrust treatment “will restore some consumer confidence that the rates out there are fair,” said David Pratt, the AIA’s senior vice president for federal affairs.
“It is very important for us to be a more normal industry from the antitrust standpoint, and this can create a more positive climate as we deal with other issues,” he said.
Those other concerns, which the insurance industry is pushing for separately, include proposals to:
* Provide a settlement system for the barrage of lawsuits under the federal Superfund, where a company hit with a cleanup sues the insurance carrier.
* Limit lawsuits for product liability.
* Create a federal reinsurance fund to ease the risks of providing coverage for natural disasters such as earthquakes, floods, fires and hurricanes.
But the rest of the industry doesn’t share the AIA’s belief that giving away the antitrust privilege will lead to victory on other issues.
“Some regional companies could go out of business, and it could do a lot of damage to consumers,” said Julie Rochman, vice president of the Alliance of American Insurers, whose membership includes many medium and smaller firms that depend on the pooled information.
The Brooks bill is “an effort by a very small segment of the industry to appease opponents of the industry in Congress and some vocal critics on the outside,” said Jack Ramirez, executive vice president and chief operating officer of the National Assn. of Independent Insurers. “No amount of tinkering with a bad bill is going to make it any better.”
The major life insurance trade group also opposes any change in the status quo, which has existed since 1945, when the insurance industry persuaded Congress to pass the McCarran-Ferguson Act, which removed the federal government from insurance regulation. Each of the 50 states oversees insurers operating within its borders.
“There is no need to fix a system that isn’t broken,” said Gene Grabowski, a spokesman for the American Council of Life Insurance. “The state governments have done a fine job. But the Brooks bill would allow the federal government, through the attorney general and the Federal Trade Commission, to get involved.”
State regulators are also skeptical. The bill could hurt some of the companies too small to collect the kind of data now provided under the pooling system, said Ed Barks, a spokesman for the National Assn. of Insurance Commissioners. “You need healthy firms to be sure you have a good marketplace.”
Brooks promised to begin work on the bill in committee soon after Congress returns next month from its Memorial Day recess.
