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WE'RE NO FANS of paramount state insurance regulation, and we haven't been big defenders of the McCarran-Ferguson Act that grants states primary responsibility for insurance regulation. In fact, we've supported the idea of an optional federal charter for insurers and producers for years.
That said, we urge lawmakers who want to repeal McCarran-Ferguson's grant to insurers of limited immunity from federal antitrust laws to proceed with extreme caution. While we can understand the frustration their constituents along the Gulf Coast have felt about how some claims stemming from Hurricane Katrina have been handled, we're at a loss to see how repeal of McCarran-Ferguson would improve that particular situation.
Some lawmakers who favor repeal make it clear that their ire is directed primarily at large personal lines insurers. Yet repeal of the limited exemption appears likely to harm small, single-state or regional insurers rather than national companies. The result could be a greater concentration of market share among fewer insurers. It's hard to see how less choice would work to consumers' advantage.
In fact, it's hard to see how a change in antitrust laws would improve claims-handling practices. The primary argument for state regulation is that states can enforce consumer protections more effectively than any federal regulator could. Complaints about claims-handling practices, or nonpayment of legitimate claims, strike us as the ultimate insurance consumer protection issue rather than a matter of antitrust law.
Repeal of McCarran-Ferguson is a fair issue for congressional debate. The question of whether a 62-year-old law is the best way to regulate insurance in an increasingly international marketplace deserves consideration. But we believe that debate shouldn't be driven by an issue that has little to do with the antitrust exemption.