02.15.07

Leahy Leads Bipartisan Effort To Hold Insurance Companies Accountable Under The Antitrust Laws

…Legislation (S.618) Would Provide Needed Scrutiny Of Insurance Practices In Gulf Coast Region

WASHINGTON – Senator Patrick Leahy (D-Vt.), Chairman of the Judiciary Committee today joined with Senate Democratic and Republican leaders to introduce a bipartisan bill that would level the playing field so that insurance companies must abide by the same competition laws as every other industry.

Leahy introduced the Insurance Industry Competition Act, along with the panel’s Ranking Member, Senator Arlen Specter (R-Pa.), Senate Majority Leader Harry Reid, (D-Nev.), and Senate Republican Whip Trent Lott, (R-Miss.).  Companion, bipartisan legislation has also been introduced in the House by Reps. Peter DeFazio (D-Ore.), Gene Taylor (D-Miss.), Bobby Jindal (R-La.), Charlie Melancon (D-La.), Rodney Alexander (R-La.), and Walter Jones (R-N.C.).

For the last six decades, insurance companies have enjoyed immunity from federal anti-trust investigation and prosecution.  The bipartisan bill introduced today would give the Department of Justice and the Federal Trade Commission the authority to apply antitrust laws to anti-competitive behavior by insurance companies. 

The insurance industry and its practices have come under serious scrutiny along the Gulf Coast in the wake of Hurricanes Katrina and Rita, said Leahy, who has raised concerns that insurers have been too often denying claims and delaying payouts to residents along the Gulf Coast instead of honoring their contractual commitments to their customers and helping rebuild that region. 

“Federal oversight would provide confidence that the industry is not engaging in the most egregious forms of anticompetitive conduct – price fixing, agreements not to pay, and market allocations,” said Leahy.   “Insurers may object to being subject to the same antitrust laws as everyone else, but if they are operating in an honest and appropriate way, they should have nothing to fear.  American consumers and American businesses rely on insurance – it is a vital part of our economy – and they have the right to be confident that the cost of their insurance, and the decisions by their insurance carriers about which claims will be paid, reflect competitive market conditions, not collusive behavior.”

“It is my hope that this legislation will bring the benefits of competition to the insurance industry and to consumers.  Too many consumers are paying too much for insurance due to the collusive atmosphere that exists in the insurance industry.  This has become a particular problem along the Gulf Coast, where insurers have shared hurricane loss projections, which may result in double-digit premium increases for Gulf Coast homeowners,” stated Specter.  “I strongly urge members who are concerned about industry exemption from the antitrust laws and collusive insurance industry practices to support this important piece of legislation.”

“One thing I learned coming out of Katrina is that the insurance industry is not subject to antitrust laws," Senator Lott said. “I've looked at the history, and there's no explanation for why that is - for why antitrust and price fixing in this industry are not covered by the federal government. Our legislation corrects this exception and applies antitrust restrictions to the insurance industry just as it is applied to most other corporations.”

 “American consumers should be confident that the cost of their insurance reflects competitive market conditions, not collusive behavior, and they should benefit through lower prices, more choices, and better services,” said Reid.  “If insurers around the country are operating in an honest and appropriate way, they should not object to being answerable under the same federal antitrust laws as virtually all other businesses.”

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(Below is Senator Leahy’s Statement on Introduction of the Bill.)

Statement Of Sen. Patrick Leahy
On Introduction Of The Insurance Industry Competition Act of 2007
February 15, 2007

MR. LEAHY:  Mr. President, our Nation’s competition laws are powerful tools to ensure that consumer welfare is the benchmark for fair and accountable industry practices.  The vast majority of the companies doing business in the United States are subject to the strictures of the antitrust laws, and consumers benefit through lower prices, more choices, and better services.  Only a few industries operate outside the federal antitrust laws, and I am pleased to introduce today a bipartisan measure that will end the insurance industry’s exemption from the requirements of those laws.  I am joined in this effort by the Ranking Member of the Senate Judiciary Committee, who has a strong record of supporting effective competition in every industry through our antitrust laws.  I am joined as well by Senator Reid and Senator Lott.  Senator Lott represents many of the Gulf Coast residents who can speak personally, and painfully, to the abuses that insurers can wreak on their policy holders.   

Insurance industry practices affect all of us.  They affect each of our constituents; they affect every business in every state.  But perhaps nowhere has the industry and its practices come under as much scrutiny as along the Gulf Coast in the wake of Hurricanes Katrina and Rita.  Insurers have been too often denying claims and delaying payouts to residents along the Gulf Coast instead of honoring  their contractual commitments to their customers, and thereby contributing to the rebuilding and rejuvenation of the area.   

The behavior of insurers in Mississippi has been so outrageous that the state’s attorney general recently convened a grand jury to investigate certain practices.  Hundreds of policyholders had to go to court to force the insurance companies to fulfill their obligations.  It seems some insurance companies are eager to collect premiums when times are good, but reluctant to aid policyholders when tragedy strikes.

Senator Lott knows all too well the difficulties his constituents have had with insurers.  His state was hit hard by Hurricane Katrina, and I commend him on his tireless efforts to ensure that resources are in place to rebuild.  I have worked with them in other contexts to support efforts to rebuild the Gulf Coast.  Most recently, I was honored to have assisted Senator Landrieu in her successful efforts to convince the Attorney General to dispatch additional law enforcement to the New Orleans region.

Our fellow citizens on the Gulf Coast who have had to cope with the devastation and destruction of the 2005 Hurricanes, and who were utterly failed by their woefully unprepared government, should not also be bullied or neglected by insurance companies in their time of need – insurance companies whose business is based on compensating people after a tragic loss. 

Unfortunately, the insurance industry has operated largely beyond the reach of federal antitrust laws for more than six decades.  If there ever was, there is no longer any justification to exempt the insurance industry from federal government oversight.  Such oversight could provide confidence that the industry is not engaging in the most egregious forms of anticompetitive conduct – price fixing, agreements not to pay, and market allocations.  

The Insurance Industry Competition Act we introduce today will simply give the Department of Justice and the Federal Trade Commission the authority to apply the antitrust laws to anticompetitive behavior by insurance companies.  Our antitrust laws are the beacon of good competition policy.  Competition is good for consumers and good for our economy.

Insurers may object to being subject to the same antitrust laws as everyone else, but if they are operating in an honest and appropriate way, they should have nothing to fear.  American consumers and American businesses rely on insurance – it is a vital part of our economy – and they have the right to be confident that the cost of their insurance, and the decisions by their insurance carriers about which claims will be paid, reflect competitive market conditions, not collusive behavior.

I thank Senator Reid and Senator Specter for joining me in this important effort.  And I thank Senator Lott for his support, and for using the lessons of his constituents’ experiences to shed light on an industry that for too long, in too many ways, has been out of the reach of federal antitrust authorities. 

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