HOUSE BILL REPORT

HJM 4014

BYRepresentatives Lux, Armstrong, Nelson, Fisch, Bristow, McMullen, Meyers, Crane, Leonard and Belcher

Requesting federal regulations of insurance.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (14)

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Day, Dellwo, Ferguson, P. King, Meyers, Niemi, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

MARCH 4, 1987

BACKGROUND:

In 1945, responding to a U.S. Supreme Court opinion rendered the year before, Congress adopted the McCarran-Ferguson Act.  In adopting the act, Congress granted the "business of insurance" a partial exemption from federal anti-trust laws.  In addition, the act provides that insurance is subject to state law and no federal law will supersede a state insurance law unless the federal law specifically relates to insurance.

Under the act, the business of insurance is subject to the Federal Trade Commission Act "to the extent that such business is not regulated by state law."  Critics have argued that "regulated by state law", for purposes of the exemption, should mean more than mere existence of a statute, that state regulation has to meet some standard of effectiveness.  The courts, however, have not agreed.  Generally, the existence of a statutory scheme of regulation, even if it is not enforced or implemented, is sufficient to preclude the application of federal trade laws to the business of insurance.

SUMMARY:

Congress is requested to repeal the McCarran-Ferguson Act, to adopt all necessary statues to effectively regulate the business of insurance and to establish federal reinsurance for liability insurance.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Pet Hunt, Executive Director, Auto Service Association.

House Committee - Testified Against:      Basil Badley, American Insurance Association.

House Committee - Testimony For:    Repeal of the federal anti-trust exemption for the insurance industry would benefit consumers by making insurers play by the same competitive rules as other businesses.

House Committee - Testimony Against:      Repeal of the federal anti-trust exemption for insurers will result in one more regulator of the insurance industry and thus, will only increase costs to taxpayers and policyholders. The states are better capable of regulating insurance to meet local needs.