Will Repealing the Federal Insurance Antitrust Exemption Help Or Hurt Consumers?

McCarran-Ferguson Reform Could Hurt Those It Is Intended To Help

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If you listen to certain Congressional critics of the insurance industry, the American people were let down in the wake of Katrina by irresponsible insurers who refused to pay legitimate claims in a timely manner. Insurance companies thought they could get away with such behavior, these critics claim, because they are protected by the antitrust exemptions they enjoy under the McCarran-Ferguson Act. Accordingly, repealing those exemptions will force insurance companies to obey the rules of competition that all other businesses live by and will prevent them from turning their backs on their policyholders in their time of need.

That may sound logical to people who know nothing about insurance, are unaware of how insurers actually responded to Katrina, and do not appreciate how antitrust laws work or the purpose of the partial antitrust exemption applicable to insurers. The argument for McCarran-Ferguson antitrust reform may or may not have merit, but such reform has nothing to do with how insurers responded to the devastating hurricane season of 2005. It is being pushed in large measure to “punish” insurers who refused to pay claims submitted by certain influential Member of Congress. As often happens with punitive legislation, the people who will end up being hurt are the general public.