ABA urges Congress to repeal McCarran-Ferguson antitrust exemption for insurance industry

"The American Bar Association favors repeal of the McCarran-Ferguson Act, which largely exempts the insurance industry from the antitrust laws," said Donald C. Klawiter, chair of the ABA Section of Antitrust Law, before a recent Senate Judiciary Committee hearing. "We believe that the law should be replaced by a series of safe harbors to make clear that certain types of conduct by insurers are pro-competitive and beneficial to the American economy."

Donald C. Klawiter

The ABA adopted this policy position in 1989, after nearly two years of discussion and debate. The Antitrust Law Section recently revisited the resolution and found it to be as appropriate today as it was when first adopted.

Klawiter spoke during the committee's consideration of the repeal of antitrust exemption for the insurance industry. He said that the safe harbors advocated by the ABA "are intended to protect legitimate pro-competitive joint activity by insurers while still subjecting the insurance industry to the antitrust rule of law. While much, if not all, of the safe harbor conduct would be permissible or even encouraged under current antitrust precedent, the idea of the safe harbors is to remove all doubt, and hence to discourage private suits challenging such pro-competitive conduct."

"It is the view of the American Bar Association," he said, "that all conduct that does not fall within the specific safe harbors should be subject to the same antitrust rules that are applied to all other sectors of the American economy. ... The safe harbors are not intended to alter existing antitrust policy."

The safe harbors noted by Klawiter include:

• Insurers should be authorized to cooperate in the collection and dissemination of past loss-experience data so long as those activities do not unreasonably restrain competition
• Insurers should be authorized to cooperate to develop standardized policy forms to simplify consumer understanding, to enhance price competition, and to support data collection efforts
• Insurers should be authorized to participate in voluntary joint-underwriting agreements to cooperate in making rates, policy forms and other insurance functions so long as these activities do not unreasonably restrain competition
• So long as the residual market mechanism is approved and actively supervised by a state regulatory agency, insurers participating in residual market mechanisms should be authorized, in connection with such activity, to cooperate in making rates, policy forms and other insurance functions
• Insurers should be authorized to engage in any other collective activities that Congress specifically finds do not unreasonably restrain competition in insurance markets.

A full copy of Klawiter's testimony is available online here [PDF]

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