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WASHINGTON--Legislation to amend the McCarran-Ferguson Act is not on the "fast track," according to a key lawmaker.
"You get frustrated" with events such as the aftermath of Hurricane Katrina, said Rep. Earl Pomeroy, D-N.D., during a wide-ranging "town hall meeting" at the Independent Insurance Agents & Brokers of America's national legislative conference and convention in Washington in late April.
But lawmakers' frustration with the way some insurers handled claims after the 2005 hurricane doesn't mean that the whole insurance regulatory structure should be changed, said Rep. Pomeroy, who served as president of the National Assn. of Insurance Commissioners when he was North Dakota's chief insurance regulator before being elected to Congress.
Bills have been introduced in both the House and Senate to repeal the McCarran-Ferguson Act's grant to insurers of limited exemption from federal antitrust laws. But "I don't see anything at all on a fast track regarding McCarran-Ferguson, nor should there be," Rep. Pomeroy said.
New Hampshire Insurance Commissioner Roger Sevigny shared Rep. Pomeroy's sentiments. Maybe the McCarran-Ferguson Act should be looked at, he said, but doing so because of claims-handling practices is totally the wrong reason.
The president of the IIABA also defended the act.
Insurance agents want "more markets, more companies and more choices for out clients," said Alex Soto, president of the IIABA and president of Miami-based In-Source Inc. Without aggregated historical loss data that McCarran-Ferguson allows insurers to gather, regional and even "super-regional" insurance would be "uncomfortable" underwriting some risks in certain areas, he said.
During an earlier address to the conference, Mr. Soto said that the act serves a legitimate purpose by allowing insurers to share data. "Large insurance companies do not need McCarran-Ferguson as much" as their smaller competitors, which depend on aggregated data to compete. He also predicted that repeal of the limited antitrust exemption could lead to a growth in agents' errors and omissions exposures as insurers would not be able to use common policy forms.
But J. Robert Hunter, director-insurance for the Washington-based Consumer Federation of America, called for McCarran-Ferguson's repeal, saying that it allows creation of cartels. "The idea that small companies can't get data is bunk," he said.
Mr. Hunter, a longtime industry critic who has been particularly critical of the insurance industry's response to Hurricane Katrina, said claims-handling problems are "endemic" to the industry. "When making record profits," insurers should stand by coverage promises, he said.
But Tom Van Berkel, chairman and chief executive officer of Main Street America Group, a Jacksonville, Fla.-based insurer, said that until last year's results, insurers for a decade had registered a relatively low return on equity compared to other industries.
"Agents need markets," said Robert Rusbuldt, CEO of the Alexandria, Va.-based IIABA, to Mr. Van Berkel. Mr. Rusbuldt asked the executive what conditions needed to be met to create markets in disaster-prone areas.
First off, the regulatory environment must be such that capital will come into the market, said Mr. Van Berkel. Rates should be deregulated, he said and added that stringent new building codes should be enforced when structures are built and incentives should be offered to make existing buildings more storm-resistant, he said.
Rep. Pomeroy said Congress will examine national catastrophe policy.
"We want development to unfold in an economically rational way," he said.
Congress will also move ahead with efforts to extend the federal terrorism insurance backstop, said Rep. Pomeroy.