Conventional wisdom in Washington is that Congress is more likely to intervene in insurance regulation during the current session than at any time in the last 50 years. Indeed, economic and political indicators point to just such an eventuality. However, it is ultimately up to the industry as to whether Congress intervenes or steers clear of the regulation controversy
This is not the first time Congress has attempted to wrest from the states their exclusive jurisdiction over insurance regulation. Since the McCarran-Ferguson Act was passed in 1945, opponents have sought its repeal. In the 1960s senators Warren Magnuson, D-WA, and Thomas Dodd, D-CT, proposed establishing a federal guaranty fund. In the 1970s Sen. Edward Brooke, R-MA, proposed establishing "dual regulation," the opportunity to obtain a federal charter and federal regulation as an alternative to state regulation. That proposal looks strikingly similar to the much-maligned structure of banking regulation today.
There was also a move for federally imimposed no-fault insurance, and in the early 1980s "unisex" rating, which many thought had an excellent chance of passing, was heavily pushed. In 1981 the Product Liability Risk Retention Act was passed to help captives respond to a perceived shortage of product liability insurance. In 1986 Congress expanded that act to include all liability coverages.
Despite ongoing discussions, little progress has been made in providing a role for the federal government. However, two major issues -amending or repealing the McCarranFerguson Act and solvency regulation-have come to the fore, giving proponents of change cause for optimism.
In the 101st Congress, the House Judiciary Committee for the first time reported out favorably a bill to amend McCarran-Ferguson. The bill's sponsor, Rep. Jack Brooks, D-TX, chairman of the judiciary Committee, introduced similar legislation in the 102nd Congress. The bill would prohibit specific activities, including price fixing, market allocation, tying arrangements and monopolization.
However, the bill is being criticized on the basis that it would limit the industry more than the complete repeal of the act. In addition, due to its vagueness, the bill's passage would produce endless litigation and deter joint industry activities that benefit consumers and the industry. As far as repealing the act, the Senate judiciary Committee in the 101st Congress was unable to act on the proposal of the principal sponsor of repeal, Sen. Howard Metzenbaum, DOH. This year the senator introduced legislation that mirrors Rep. Brooks', a move that should facilitate its progress.
Regarding solvency regulation, Rep. John Dingell, D-MI, chairman of the House Energy and Commerce Committee, intends to introduce legislation designed to improve solvency regulation through the development of a national regulatory body. He recently circulated a discussion outline defining a possible federal role in insurance regulation. The outline includes the following proposals: preempting the states' regulations regarding surplus lines and reinsurance companies; federal minimum solvency standards, including federal accreditation of state insurance departments; a federal insurance fraud statute; federal liquidation of insolvent insurers; and possible authorization of a federal agency to supervise state regulation or a self-regulatory group.
Factors Favoring Change
Since Congress responds to economic and political pressures, which are both intertwined in insurance regulation, a good case can be made that such pressures will push Congress to act on McCarran-Ferguson or solvency reform, or both. A prime economic factor is the pressure that can be brought to bear on Congress due to market cycle swings in the insurance industry. Although the life/health segments of the market may not operate economically in conjunction with the property/casualty side, voters may not heed the difference. …