Senator Leahy Introduces The Insurance Industry Competition Act

For the last six decades, insurance companies have enjoyed immunity from federal anti-trust investigation and prosecution. On February 15th of this year, Senator Leahy (D. Vermont) announced a bipartisan bill that 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 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.

The concern of our legislators in introducing this bill is that by allowing the insurance industry to avoid the scrutiny of anti-trust regulation, this has led to price fixing, agreements not to pay, and market allocations. Americans rely on insurance, 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, and not private agreements among major insurance companies to deny groups of claims.

Senator Trent Lott, not normally associated with issues such as consumer protection, noted: “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. In this regard, two of the area’s biggest home insurers – Allstate and State Farm – are moving out and abandoning the area. They are not moving out because the companies have hit on hard times — State Farm profits increased 65% in 2006 with earnings of $5.3 billion and Allstate’s 2006 profits rose to a record $5 billion, nearly tripling its profits from the year before.


In summary, this writer strongly supports The Insurance Industry Competition Act, which would repeal the anti-trust exemption afforded to insurance companies and give the Department of Justice and the Federal Trade Commission the authority to apply the antitrust laws to anticompetitive behavior by insurance companies. This is a measure whose time is long overdue.