The insurance industry, battling a consumer revolt that has spread from California to Congress, suffered another setback yesterday as the House Judiciary Committee voted to strip away most of the industry's historic exemption from federal antitrust laws.
The measure, which now goes to the full House, would roll back a favored position held by the industry since the end of World War II. Proponents said the vote reflected a growing recognition among members of Congress of the extent of consumer unhappiness with insurance rates and that, as one consumer lobbyist put it, "there are votes in opposing the industry."
The bill, sponsored by committee Chairman Jack Brooks (D-Tex.), would prevent insurers from fixing prices, tying the sale of insurance to the sale of any unrelated product and attempting to monopolize or allocate market segments.
"This is historic," said Linda Lipsen of Consumers Union, which lobbied in favor of the measure.
The panel's 14 Republicans voted solidly against the bill. They were joined by three Democrats -- including Reps. Bruce Morrison of Connecticut and Dan Glickman of Kansas, both states with heavy concentrations of insurance companies -- to make the final vote a close 19 to 17. However, a consumer lobbyist expressed optimism that in the current political climate, the bill will do better on the House floor.
The antitrust exemption, which Brooks noted "has been the subject of vigorous debate for at least the last decade" and has been before the committee for the past three congresses, is strongly defended by insurers.
They argue that since insurance involves predicting future risks, carriers must be free to pool experience and other data to make accurate forecasts. Such forecasts are essential if policies are to be correctly priced, they say, and depriving companies, particularly small ones, of access to such data pools would drive insurance prices up and perhaps force small firms out of business.
In the past, an industry organization called the Insurance Services Office has collected data and even put out advisory rates, although the latter practice was halted last year.
For most of the period since the 1945 passage of the exemption, known as the McCarran-Ferguson Act, legislators have accepted this reasoning, and earlier efforts to repeal or weaken the exemption made little progress.
But the crisis in commercial property-casualty insurance during the mid-1980s, plus skyrocketing automobile premium costs in recent years, have sparked widespread questions about industry practices.
Several states, notably California, have moved to roll back auto insurance rates and have been attempting to bring state antitrust laws to bear on insurers.
These forces were evident in the committee's debate on the issue. Brooks dismissed the industry's arguments as rhetoric, not hard evidence, and said his bill would "allow the brisk winds of competition to blow again in this industry."
Rep. Don Edwards (D-Calif.) said, "It is not an undue burden for companies to make their own estimates of future costs -- contractors, banks, manufacturers and many others do it all the time -- and to use their own expense records to set their own prices."
Rep. Hamilton Fish Jr. (R-N.Y.) replied that the industry's data collection activities "are not anti-competitive" and that "the committee is kidding itself if it thinks the cost of property-casualty insurance will go down" as a result of this bill.
Afterward, the National Association of Independent Insurers said the measure "may prove to be disastrous for consumers and small insurance companies alike."
Brooks's bill stops short of full repeal of the McCarran-Ferguson Act, but instead spells out activities that are to be made subject to federal antitrust law. It specifically permits insurers to continue to pool data from past experience and even to make future projections -- a process called "trending" -- as long as they do not fix prices.
Under the measure, state attorneys general could bring suits against companies they believe are violating any of these provisions. In addition, violators could be sued by private individuals or companies, by the Justice Department or by the Federal Trade Commission. If found guilty, they would be exposed to possible treble damage awards.
On the Senate side, the industry's prospects are better. A measure sponsored by Sen. Howard M. Metzenbaum (D-Ohio) remains in committee, and several observers said they feel it unlikely that it would reach the floor this year.
However, several sources said that some segments of the industry are considering a possible deal in which they would trade some of the McCarran-Ferguson protections for federal preemption of some of the more aggressive state laws and regulations.
This is not considered very likely because it would represent a reversal not only of the industry's historic defense of the McCarran-Ferguson Act but also of its long-standing preference for state regulation.