Repeal Insurance Industry Antitrust Exemption
U. S. Congress
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The media often speak of major league baseballs exemption from antitrust regulation as being unique. An exemption much more important to all Americans was given to the insurance industry in 1945. (http://www.antitrustinstitute.org/links/exempt.cfm#insurance)
Most public discussion of insurance rate problems begins from a premise that market forces should operate in the insurance industry as they do in so many other parts of American economic life.
Actually, market forces produce an optimal or fair price only where buyers and sellers all have equivalent information. That balance is almost never achieved in any market, and it certainly does not exist in the insurance market.
Even the average local insurance company knows much more about risks, etc., than the average homeowner. The re-insurers, the parent companies at national and international levels, have a lot more information than anybody else has. Even the states, which in the American federal system are expected to regulate the industry, cannot get access to all the information that those collaborating insurance firms have.
Because the federal McCarran-Ferguson Act of 1945 exempted the insurance industry from anti-trust regulation, the major firms that handle reinsurance can and do collude on risk assessment and rate-setting in ways that would be illegal in any other industry.
That is why, as the Los Angeles Times reported, The companies that provide Americans with their homeowners and auto insurance made a record $44.8-billion profit last year even after accounting for the claims of policyholders wiped out by Hurricane Katrina and the other big storms of 2005, according to the firms' filings with state regulators(Los Angeles Times, 4/5/06).
A 2006 report of the insurance industry financial situation states, Over the past seven years, 1999 through 2005, the insurance industry has seen its profits nearly double, while adding almost $100 million to its surplus reserves. According to data provided by the Insurance Information Institute, industry profits increased from $22.2 billion in 1999 to $43 billion in 2005. The data also indicate that the insurance industry has seen its surpluses grow by a third from $336.30 billion in 1999 to $427.1 billion in 2005 (p.11, in Pattern of Greed: How Insurance Companies put Profits over Policyholders, available at
Instead of trying to correct the natural imbalance in the insurance market to protect consumers and local governments, the United States government years ago came down on the side of the insurance companies. Our state legislators cannot fix that.
We ought to be pressuring our representatives in congress to at least make a start by repealing the unique exemption of the insurance industry from antitrust laws.