A New Priority One

Imagine your agency’s daily operations without standardized insurance forms. If the Senate’s majority leader and minority whip have their way, you won’t have to imagine it. Life without standard forms will be the new reality.

As independent agents and brokers from around the country descend on Washington, D.C. this month for the Big “I” Legislative Conference & Convention, they will be greeted with a new legislative priority: the McCarran-Ferguson antitrust repeal. And what makes this issue particularly troubling is its political powerhouse backing: Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Whip Trent Lott (R-Miss.) are both supporting a bill to repeal the industry’s limited antitrust exemption.

The Big “I” opposes S. 618 and H.R. 1081, the Insurance Industry Competition Act, sponsored by Sen. Patrick Leahy (D-Vt.) and Rep. Peter DeFazio (D-Ore.). In written testimony for a Senate Judiciary Committee hearing in March, the Big “I” argued that a repeal would negatively impact consumers, independent agents and small and medium-sized insurance carriers. The fact that the committee moved so quickly to hold a hearing shows the interest this issue is creating on Capitol Hill.

While the Big “I” has concerns about any modifications to the McCarran-Ferguson Act limited antitrust exemption, the long-standing practices of sharing historical loss data (but not final prices) and the joint development of standardized policy forms must be protected. The Big “I” believes that a repeal would not only negatively affect the livelihood of agents and brokers, but it also would have a disparate impact on small and medium-sized insurance companies that rely on the exemption to compete on a level playing field with much larger insurers. A repeal could reduce competition, increase costs and reduce availability because the threat of antitrust litigation could make insurers unwilling to engage in efficiency-enhancing cooperative activities. The association also opposes the dual federal and state oversight that the proposed legislation would create. There are three main areas that the Big “I” believes should still be protected under federal law and not be subject to antitrust law challenges:

Standardization of forms. McCarran-Ferguson has permitted the development of standardized policy forms under the vigilant eye of state regulators. Without this activity being protected, it will be dif¬ficult for agents to interpret and explain differences in policies to consumers. In addition, this has greatly benefited consumers by permitting apples-to-apples comparison of material terms of coverage.

Collection of historical loss data. This limited antitrust exemption also protects the pro-consumer activity of sharing past loss data. Without a safeguard for the pooling of historical loss data, small and medium companies that require pooled data to properly measure risk would be severely disadvantaged. This would result in a competitive advantage for large national companies with economies of scale that can assess risk accurately based on their own internal data. Failure to protect this activity would substan¬tially limit the ability of independent agents to offer consumers choice.

Redundant state-federal regulation. The Big “I” is also concerned that the act would lead to unnecessary dual federal and state regulation by granting the Federal Trade Commission additional over¬sight powers to investigate the insurance market. Insurance companies are subject to state antitrust laws and, where not regulated by the state, federal antitrust laws. The insurance market is already heavily regulated at the state level, and subjecting the market to additional oversight from the federal govern¬ment would create more problems than it solves.

As Congress moves to further consider the McCarran-Ferguson antitrust repeal and other issues, the Big “I” needs your help to educate members of Congress on what their actions mean for your business. It’s not too late—register now to attend the Big “I” Legislative Conference & Convention on April 25–27. To register online, go to www.independentagent.com and click “Events and Conferences.”

Katie Butler (katie.butler@iiaba.net) is IA editor in chief.

Top Issues

Agents will meet with hundreds of member of Congress later this month at the Big “I” Legislative Confer¬ence & Convention to educate them on the issues that matter most to independent agents and brokers. In addition to the McCarran-Ferguson antitrust exemption repeal, the topics that top the list this year include:

Insurance regulatory reform. With Optional Federal Charter legis¬lation still lurking on Capitol Hill, the Big “I” continues to oppose federal insurance regulation and, instead, advocates a pragmatic reform approach that utilizes targeted, fed¬eral legislative tools to improve the state-based system.

Terrorism insurance. With cur¬rent legislation expiring at the end of 2007, the Big “I” supports a long-term extension of the federal terror¬ism insurance program to continue protecting our country’s economic security.

Flood insurance reform. The Big “I” supports the Flood Insurance Reform and Modernization Act of 2007 (FIRM), introduced by House Financial Services Committee Chair¬man Barney Frank (D-Mass.).

Natural disaster risk. The Big “I” is working with interested parties to discuss all potential solutions, includ¬ing federal catastrophe funds, insurer tax-free reserving and expansion of the National Flood Insurance Pro¬gram to include windstorm coverage.