The Big Insurance Equation for Hypocrisy

Antitrust laws were created to protect consumers by promoting market competition. These laws are supposed to regulate anti-competitive conduct so that no company becomes too powerful to impact pricing and the freedom of the market. Very few industries and businesses are exempt from antitrust laws. One big industry that is: insurance.

This means that on a federal level, insurance companies are completely exempt from restrictions on coordinating prices on products. States are left to regulate insurance, and laws vary. But in most states, insurance companies can engage in joint data collection, policy development, and price trending.

The insurance industry thinks they should get special treatment and be free of these federal regulations that protect consumers, yet they want to limit customer choice by promoting harmful overregulation of legal funding?

Free market competition and consumers should be empowered, not the insurance industry.

Antitrust exemptions = bad for consumers

In 1945, Congress passed a law called The McCarran-Ferguson Act creating exemptions from antitrust liability for the “business of insurance.”

According to State Farm Insurance, the exemption is “very narrow”. But in 2010 the sitting Assistant Attorney General of the Antitrust Division at the Department of Justice, Christine Varney, testified before Congress that the exemption is “very expansive” with regard to anything that falls within the business of insurance. This includes premium pricing and market allocations.

Varney said that insurance companies are “virtually always found immune” of the “most egregiously anticompetitive claims, such as naked agreements fixing price or reducing coverage” due to their antitrust exemption.

Similarly, the acting Assistant Attorney General from the Office of the Attorney General for New York, Elinor Hoffmann, asked Congress in 2006 to reexamine McCarran-Ferguson Act because it “precludes federal antitrust enforcement of serious anticompetitive conduct” in insurance. She referenced her department’s investigations into “new and pervasive instances of abuse” in the insurance sector, including bid-rigging and questionable brokerage fees.

When addressing the potential repeal of McCarron-Ferguson, State Farm proudly pronounces on its website, “Any change . . . should promote competition, not inhibit it. We will oppose any proposals that inhibit competition or add extra layers of regulation on top of the current state–based regulatory system.”

Really? Antitrust laws promote competition and could lead to more choice for consumers, but the insurance industry does not want that kind of regulation for themselves.

Elimination of market alternatives = bad for consumers

At the same time the insurance industry is trying to put regulations on competitive threats. It want to use its influence to eliminate consumers’ ability to access legal funding—a free-market alternative consumers use to make ends meet instead of taking an insurer’s lowball settlement offer far below the fair value of their claim.

Antitrust exemptions + the elimination of market alternatives = VERY BAD FOR CONSUMERS.

The insurance industry has spent hundreds of millions of dollars on lobbying—a truly massive sum. One of its key legislative initiatives is to push zealous regulations on the market alternative legal funding provides to consumers.

Free market competition and consumers should be empowered, not the insurance industry.