The insurance newswires have buzzed with trade association statements decrying congressional proposals to repeal the McCarran-Ferguson Act and defending the act with sophomoric arguments. As a commentator who believes in the McCarran-Ferguson Act, when I read these knowledgeable pronouncements from insurance leaders I have to ask: Do they really believe this stuff?

One statement after another ties together strings of keywords and catchphrases that communicate one clear message: Very few people in the insurance industry have even read the McCarran-Ferguson Act.

From the Wards of New Orleans to the hearing rooms of the U.S. Capitol, a consensus is building that the states are unable or unwilling to regulate insurance. Now, influential members of Congress have proposed a different kind of deregulation: recall the states’ borrowed authority to regulate insurance and in return apply federal antitrust law and Federal Trade Commission oversight.

When the National Conference of Insurance Legislators (NCOIL) convenes in Seattle, July 19-22, discussion regarding an effort in Congress to repeal the McCarran-Ferguson Act is likely to top the agenda. Over the past six months, NCOIL officers have conducted an intense lobbying effort in defense of the 62-year-old act.

The effort kicked off with the initiation of a study of state authority over insurance. The study will be conducted under the auspices of the NCOIL-sponsored/industry-funded Insurance Legislative Foundation. The Request for Proposal for the study included seven points that the final report should include:

1. The nature and history of regulation over the business of insurance

2. Laws, rules, and procedures that enumerate the jurisdictional responsibilities of officials in governing insurance policy and related consumer protections, including issues regarding the authority that may be due nonprofit corporations and similar entities

3. Case studies that help explain the evolution leading to the current insurance regulatory environment, including the growth of assets and of information utilization and security

4. The extent and effectiveness of intragovernmental communication and cooperation regarding insurance law

5. The impact that functional regulation, as established by the Gramm-Leach-Bliley Act (GLBA) of 1999, has had on insurance oversight and responsibility

6. The consequences of federal preemptive measures on insurance policymaking

7. The role that organizations such as NCOIL and other state legislative groups, the National Association of Insurance Commissioners (NAIC), the National Governors Association (NGA), and the National Association of Attorneys General (NAAG), among others, play in insurance public policy

The sudden and abiding interest in just what the McCarran-Ferguson Act means is in direct response to S. 618, The Insurance Industry Competition Act of 2007. The legislation is the most recent of a series of bills drafted in response to a spike in medical malpractice insurance rates in the early years of this decade. Senator Patrick Leahy (D-Vt.), who chairs the Senate Judiciary Committee, sponsored the bill, which has the support of the committee’s ranking Republican, Senator Arlen Specter (R-Pa.).

On June 20, 2006, during a hearing of the Judiciary Committee, Senator Leahy observed, “Among the 15 best-rated medical malpractice insurance providers, premiums rose dramatically between 2000 and 2005, while the cost of claims paid out remained flat. If claims are not driving premiums, but insurance costs among competing companies are rising in lockstep with each other, it is time to admit that there are other causes of this problem.”

Senator Leahy continued, “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. American consumers, from sophisticated multi-national businesses to individuals shopping for personal insurance, have the right to be confident that the cost of their insurance reflects competitive market conditions, not collusive behavior.”

To a lesser but still material extent, congressional support for McCarran-Ferguson repeal has grown in response to reports of slow, incomplete and combative claims settlement practices following Hurricanes Katrina, Rita and Wilma. Take a trip to the devastated areas of the Gulf Coast, and you will hear a consensus opinion that there is no state insurance regulation.

One of those disgruntled Gulf Coast policyholders is U.S. Senator Trent Lott (R-Miss.), who has battled with his insurance company since losing a coastal home to Katrina. Lott, the Republican Whip, has expressed support for Senator Leahy’s repeal bill. He also supports the creation of a federal backstop for catastrophe losses.

In addition to trouble in Congress, the insurance sector received a body blow from a federal commission charged with conducting a review of antitrust oversight and enforcement. The Antitrust Modernization Commission reported to Congress and the President on April 2, 2007. The report called on the Congress to repeal the McCarran-Ferguson Act.