Insurance Competitive Pricing Act of 1993 : hearing before the Subcommittee on Economic and Commercial Law of the Committee on the Judiciary, House of Representatives, One Hundred Third Congress, first session, on H.R. 9, to modify the antitrust exemption

302 Pages·1994·8.2 MB·English

by  United States. Congress. House. Committee on the Judiciary. Subcommittee on Economic and Commercial Law

INSURANCE COMPETITIVE PRICING
ACT OF
1993
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC AND COMMERCIAL LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OP REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
FIRST SESSION
ON
9
xl.Iv.
TO MODIFY THE ANTITRUST EXEMPTION APPLICABLE TO THE
BUSINESS OF INSURANCE
JULY 29, 1993
Serial No. 13
GOVT.
DEPOSITGRY
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B0ST01\I PUBLIC LIBRAFY HAMPGEN LAW LIBRARY
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U.S. GOVERNMENT PRINTING OFFICE
75-090 WASHINGTON : 1994

INSURANCE COMPETITIVE PRICING
ACT OF
1993
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC AND COMMERCIAL LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
FIRST SESSION
ON
H.R. 9
TO MODIFY THE ANTITRUST EXEMPTION APPLICABLE TO THE
BUSINESS OF INSURANCE
JULY 29, 1993
SeHal No. 13
GOVT.
DEPOSITORY
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R 7 1994
K-- ' M
BOSTON PUBLIC LIBRAFY
HAMPOEN LAW LIBRARY
iOVERNMENTDOCUMENTS DEPARTMENT
Printed for the use of the Committee on the Judiciary
U.S. GOVERNME^^^ PRINTING OFFICE
75-090 WASHINGTON : 1994
COMMITTEE ON THE JUDICIARY
JACK BROOKS, Texas, Chairman
DON EDWARDS, California HAMILTON FISH, Jr., New York
JOHN CONYERS, Jr., Michigan CARLOS J. MOORHEAD, California
ROMANO L. MAZZOLI, Kentucky HENRY J. HYDE, lUinois
WILLIAM J. HUGHES, New Jersey F. JAMES SENSENBRENNER, Jr.,
MIKE SYNAR, Oklahoma Wisconsin
PATRICIA SCHROEDER, Colorado BILL McCOLLUM, Florida
DAN GLICKMAN, Kansas GEORGE W. GEKAS, Pennsylvania
BARNEY FRANK, Massachusetts HOWARD COBLE, North Carolina
CHARLES E. SCHUMER, New York LAMAR S. SMITH, Texas
HOWARD L. BERMAN, California STEVEN SCHIFF, New Mexico
RICK BOUCHER, Virginia JIM RAMSTAD, Minnesota
JOHN BRYANT, Texas ELTON GALLEGLY, California
GEORGE E. SANGMEISTER, Illinois CHARLES T. CANADY, Florida
CRAIG A. WASHINGTON, Texas BOB INGLIS, South Carolina
JACK REED^ Rhode Island BOB GOODLATTE, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
DAVID MANN, Ohio
MELVIN L. WATT, North CaroUna
XAVIER BECERRA, California
Jonathan R Yarowsky, General Counsel
Alan F. Coffey, Jr., Minority ChiefCounsel
Subcommittee on Economic and Commercial Law
JACK BROOKS, Texas, Chairman
JOHN CONYERS, Jr., Michigan HAMILTON FISH, Jr., NewYork
MIKE SYNAR, Oklahoma ELTON GALLEGLY, California
PATRICIA SCHROEDER, Colorado CHARLES T. CANADY, Florida
DAN GLICKMAN, Kansas BOB INGLIS, South Carolina
HOWARD L. BERMAN, California .....,«vBOB GOODLATTE, Virginia
RICK BOUCHER, Virginia CARLOS J. MOORHEAD, CaUfomia
ROBERT C. SCOTT, Virginia
DAVID MANN, Ohio r; • n
MELVIN L. WATT, North Cardlilna
Cynthia W. Meadow, Courkel
George P. Slovei^Assistant Cjpunsel
Perry APEWAim,Assistant C^nsel
Carrie Bedwell,Assistant Cainsel
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CONTENTS
HEARING DATE
Page
Jxily29, 1993 1
TEXT OF BILL
H.R. 9 3
OPENING STATEMENT
Brooks, Hon. Jack, a Representative in Congress from the State of Texas,
andchairman, Subcommitteeon EconomicandCommercial Law 1
WITNESSES
Bingaman, Hon. Anne K., Assistant Attorney General, Antitrust Division,
DepartmentofJustice 15
Fusco, Michael, executivevice president and chiefoperatingofficer, Insiu-ance
Services Office, Inc 176
Gustafson, EricG., president, IndependentInsuranceAgents ofAmerica 81
Hunter, J. Robert, president, National Insurance ConsumerOrganization 176
Lipsen, Linda, legislative director, Consimiers Union 178
Nelson, Rick K., president, R.K. Nelson & Associates, Inc., Lake Forest,
IL 178
Pollard, William L., executive vice president and general manager. North
Carolina Farm Biu-eau Mutual Insurance Co., on behalf of the Alliance
of American Insurers, American Council of Life Insurance, Health Insur-
ance Association ofAmerica, National Association ofIndependent Insurers,
National Association ofLife Underwriters, National Association ofMutual
Insurance Cos., andNationalAssociation ofProfessional InsuranceAgents 178
Price, Hon. Laurel A., deputy attorneygeneral. NewJersey Division ofCrimi-.
nal Justice, and chair, Multistate Antitrust Task Force, National Associa-
tionofAttorneys General 25
Rector, John M., senior vice president, government affairs, and general coun-
sel, NationalAssociationofRetail Druggists 179
Vagley, RobertE., president,American Insiu'anceAssociation 70
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Berman, Hon. Howard L., a Representative in Congress from the State of
California: Statement 13
Bingaman, Hon. Anne K., Assistant Attorney General, Antitrust Division,
DepartmentofJustice: Prepared statement 17
Brooks, Hon. Jack, a Representative in Congress from the State of Texas,
and chairman, Subcommittee on Economic and Commercial Law: Jidy 28,
1993, letter from James F. Rill, CoUier, Shannon, Rill & Scott, and former
AssistantAttorney General,AntitrustDivision, DepartmentofJustice 36
Fish, Hon. Hamilton, Jr., a Representative in Congress from the State of
New York: November 18, 1991, letter to Chairman Brooks from W. Lee
Rawls, Assistant Attorney General, Office of Legislative Affairs, Depart-
ment of Justice; September 10, 1987, letter to Mr. Fish from Charles
F. Rule, Assistant Attorney (Jeneral, Antitrust Division, Department of
Justice 42
Fusco, Michael, executivevice president and chiefoperating officer. Insurance
Services Office, Inc.: Prepared statement 104
(UI)
IV
Page
Gustafson, Eric G., president, Independent Insvirance Agents of America:
Prepared statement 83
Hunter, J. Robert, president. National Insurance Consiuner Organization:
Prepared statement 131
Lipsen, Linda, legislative director. Consumers Union: Prepared statement 122
Moorhead, Hon. Carlos J., a Representative in Congress from the State of
California: Statement 9
Nelson, Rick K., president, R.K. Nelson & Associates, Inc., Lake Forest IL:
Prepared statement 142
Pollard, William L., executive vice president and general manager, North
Carolina Farm Bureau Mutual Insurance Co., on behalf of the Alliance
of American Insvu-ers, American CouncU of Life Insurance, Health Insur-
ance Association ofAmerica, National Association ofIndependent Insurers,
National Association ofLife Underwriters, National Association ofMutual
Insurance Cos., and National Association ofProfessional Insurance Agents:
Prepared statement 98
Price, Hon. Laurel A., deputy attorney general. NewJersey Division ofCrimi-
nal Justice, and chair, Multistate Antitrust Task Force, National Associa-
tionofAttorneys General: Prepared statement 27
Rector, John M., senior vice president, government affairs, and general coun-
sel, NationalAssociationofRetail Druggists: Prepared statement 149
Scott, Hon. Robert C, a Representative in Congress from the State of Vir-
ginia: July 28, 1993, letter to Mr. Scott from Stephen D. Rosenthal, attor-
ney genered, Commonwealth of Virginia, and House Joint Resolution No.
330, General Assembly of Virginia, 1987 session, memoriaUzing Congress
torepeal theinsxu"anceindustiysexemptionfrom Federal antitrustlaws .... 65
Synar, Hon. Mike, a Representative in Congress from the State ofOklahoma:
Statement 12
Vagley, RobertE., president, American InsuranceAssociation: Prepared state-
ment 73
APPENDIXES
—
Appendix 1. Responsesto additional questions forthe record: 181
Ms. Bingaman 181
Mr. Fusco 184
Mr. Gustafson 191
Mr. Hunter 198
Ms. Lipsen 201
Mr. Nelson 202
Mr. PoUard 206
Mr. Price 208
Mr. Rector 214
Mr. Vagl—ey 286
Appendix2. Material submitted forthehearingrecord: 290
American Farm Bureau Federation: July29, 1993, statement 290
Corwin, Philip S., director and counsel, operations and retail banking,
American Bankers Association: August 4, 1993, letter to Chairman
Brooks 292
INSURANCE COMPETITIVE PRICING ACT OF
1993
THURSDAY, JULY 29, 1993
House of Representatives,
Committee on the Judiciary,
Subcommittee on Economic and Commercial Law,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in room
2141, Rayburn House Office Building, Hon. Jack Brooks (chairman
ofthe subcommittee) presiding.
Present: Representatives Jack Brooks, John Conyers, Jr., Mike
Synar, Dan Glickman, Howard L. Berman, Robert C. Scott, David
Mann, Melvin L. Watt, Hamilton Fish, Jr., Elton Gallegly, Charles
T. Canady, Bob Inglis, Bob Goodlatte, and Carlos J. Moorhead.
Subcommittee staff present: Cynthia W. Meadow, counsel;
George P. Slover, assistant counsel; Perry Apelbaum, assistant
counsel; Carrie Bedwell, assistant counsel; Catherine S. Cash, re-
search assistant; Suzanne Young, secretary; full committee stsiff
present: Jonathan R. Yarowsky, general counsel; Alan F. Coffey,
Jr.; minority chiefcounsel; and Mary Margaret Adams, intern.
OPENING STATEMENT OF CHAIRMAN BROOKS
Mr. Brooks. This morning the subcommittee will hear testimony
on the bill H.R. 9, the Insurance Competitive Pricing Act of 1993.
The insurance industry's antitrust exemption continues to
unleash passionate arguments on all sides, which the committee
has listened to for three Congresses. But more important, we have
paid close attention to the reasoning behind the arguments.
The insurance industry touches every comer of the American
economy, reaches into every pocketbook. Yet this all-important in-
dustry has been exempt from the antitrust laws since the
McCarran-Ferguson Act of 1945 was passed. At that time most in
Congress believed that they had only agreed to a short 3-year mor-
atorium before the antitrust laws would apply with full force. But
the devil was in the details, and the conference report made a little
change that went virtually unnoticed: It transformed the 3-year
moratorium into a permanent exemption.
While State oversight of insurance has generally proved to be
useful, it has certainly not been infallible in all lines of business.
For this reason, I have always contended that Congress should
defer to State regulation where it is effective and accountable. But
where it is not, there must be some competitive safety net to safe-
guard consumers. This is the crux ofthe legislation.
(1)
As we approach the 21—st century, blanket antitrust exemptions
can no longer bejustified ifthey ever could. Over the past several
years, many thousands, if not millions, of American consumers
have found themselves unable to buy affordable insurance to run
their businesses, protect their homes and automobiles, and protect
their health. And it seems that every time there is a major accident
or natural disaster large enough to make the news, some in the in-
surance industry are right there talking about raising pri—ces.
For anyone who has r—ead H.R. 9, it should be obvious at times,
painfully obvious, to me that the legislation is a compromise bill,
drafted to avoid the more radical changes strongly advocated by
some. I have been gratified in recent months that in addition to
consumer groups and State enforcement officials, segments of the
insurance industry itselfhave begun to recognize that balanced re-
form can be achieved when proper care is given to maintaining and
expanding new markets and acknowledging that certain insurance
practices are necessary and even procompetitive.
We all appreciate that the insurance industry provides invalu-
able services to the American public. But the challenges facing the
American free enterprise system can no longer permit a critical sec-
tor of the economy to be totally immune from both competitive
forces and effective regulation.
My sense is that new developments in the economy and in the
Nation's leadership auger well for this Congress to pass needed
modification of McCarran-Ferguson so that both we and the indus-
try can finally move on to other matters. It is high time.
[The bill, H.R. 9, follows:]
— —
3
103d congress H.R.9
1st Session
Tomodifytheantitrastexemption applicableto thebusinessofinsurance.
IN THE HOUSE OF REPRESENTATIVES
January 5, 1993
Mr. Brooksintroducedthe followingbill; whichwas referredto the
Committee onthe Judiciary
A
BILL
To modify the antitrust exemption applicable to the business
ofinsurance.
1 Be it enacted by the Senate and House ofRepresenta-
2 tives ofthe United States ofAmerica in Congress assembled,
3 SECTION1.SHORTTITLE.
4 This Act may be cited as the "Insurance Competitive
5 PricingAct of1993".
6 SEC.2.AMENDBIENTS.
7 Section 2 of the Act of March 9, 1945 (59 Stat. 34;
8 15 U.S.C. 1012), commonly known as the McCarran-Fer-
9 gusonAct, is amended
10 (1) in subsection (b)
—
1
2
1 (A) by striking ": Provided, That after
2 June 30, 1948," and inserting ", except that",
3 (B) by inserting "section 5 of after
4 "Clayton Act, and",
5 (C) by inserting "as such section 5 relates
6 to monopohes, attempts to monopolize, and un-
7 lawful restraints of trade," after "Commission
8 Act, as amended,", and
9 (D) by striking "that such business" and
10 all that follows through "law." and inserting
1 the following:
12 "that—
13 "(1) such business is not regulated by State
14 law; or
15 "(2) the conduct of a person engaged in such
16 business involves
17 "(A) price fixing;
18 "(B) allocating with a competitor a geo-
19 graphical area in which, or persons to whom,
20 insurance will be offered for sale;
21 "(C) unlawfully tying the sale or purchase
22 of—
23 "(i) one type of insurance to the sale
24 or purchase of another type of insurance;
25 or