S. 618/ H.R. 1081, the Insurance Industry Competition Act

• Whether it is home, auto, property or commercial insurance, American families and businesses all rely on insurance.  Americans have a right to be confident that if they are paying for insurance coverage, their insurance carrier will be there for them if tragedy strikes.

• Unfortunately, in the wake of Hurricane Katrina, many Gulf Coast residents who had lost everything were left to face insurance companies refusing to fulfill their commitments.  Some insurers have been denying claims and delaying payouts to Gulf Coast residents instead of honoring their contractual commitments, and helping rebuild the region.

• Now two of the area’s biggest home insurers – Allstate and State Farm – are moving out and abandoning the area.  They are not moving out because the companies have hit on hard times -- State Farm profits increased 65% in 2006 with earnings of $5.3 billion and Allstate’s 2006 profits rose to a record $5 billion, nearly tripling its profits from the year before.

• Many homeowners are fighting back through the justice system to force these insurance companies to honor their contracts.  But the insurance companies are counting on most people to not fight back, as they continue to push for legislation to limit the rights of consumers in the civil justice system.  That is why there needs to be a legislative solution to hold the insurance industry more accountable.

The Insurance Industry Competition Act

• For more than 6 decades, the insurance industry has operated beyond the reach of federal antitrust laws. The McCarran-Ferguson Act, which gives states the authority to regulate the “business of insurance,” also exempts the business of insurance from the federal antitrust laws.

• The Insurance Industry Competition Act would repeal the exemption and simply give the Department of Justice and the Federal Trade Commission the authority to apply the antitrust laws to anticompetitive behavior by insurance companies.  This Act would not affect the ability of each state to regulate the business of insurance. 

• Such oversight would ensure that the industry is not engaging in the most egregious forms of anticompetitive conduct – price fixing, agreements not to pay, and market allocations.  When antitrust immunity is used in a way that distorts the market, it leads to higher prices and poorer service, harming all consumers.

• Our antitrust laws are about good competition. Competition is good for consumers and good for our economy. The vast majority of the companies doing business in the United States are subject to these antitrust laws, and consumers benefit through lower prices, more choices, and better services.  Why should the insurance industry be treated any differently?