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FOREWORD

For approximately 18 months, the Departsen:

on behalf of and at the request of the Task Groups

Antitrust Immunities, has conducted a study of the most

particular issues presented by the overall question of insurance regulation, reach tentative conclusions as to their resolution, and to outline a proposal which would allow for greater competition among insurers without direc interference with insurance regulation as now practiced.

our proposal would allow insurers that wish to adopt a more entrepreneurial approach to choose a less regulated national system under which they would enjoy no special antitrust immunity. Other insurers, who continue opt for state regulation, would still enjoy the protectior

essence,

of insurance. Focusing primarily on property tab. lines, the Department gathered information on the questi of whether the present scheme of state regulation en federal antitrust immunity attending the pricing and marketing of insurance is in the public interest. the matter is deserving of the closest considerate particularly in view of the fact that many forms of me surance are widely viewed as a necessity in Abercase The Department's early appreciation of the complex issues involved has been repeatedly confirmed; reake the business of insurance has been found to entail * and sometimes conflicting economic and social goals. Furthermore, knowledgeable opinion differs substante the weight to be assigned to each such goal and of methods for their realization.

The following report and recommendations represe: Department's best efforts to identify and examine the

of the McCarran-Ferguson Act.

We believe that our proposal is sound and workable. framing it, we have made a substantial effort to ascertair and consider the views of those with expertise in the industry and its regulation.

However, we realize that we have not been able to consult with all who may be interest and we have not had a detailed document to offer those wit

Therefore, we believe that we should offer the Department's tentative views at this time to stimulate comment by all interested parties and consideration of the issues by regulatory and legislative bodies at both the state and federal levels.

whom we have consulted.

PROJECT STAFF

The Report was prepared in the Department of Justice by Antitrust Division attorney Guy B. Maseritz, now Chief of

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the Division's Legislative Unit, subject to the immediate supervision of Neil E. Roberts, Chief of the Division's

Evaluation Section and the overall guidance of Jonathan C.
Rose, Deputy Assistant Attorney General. Also contributing

to the preparation and analysis of the Report were Antitrust

Division attorneys Daniel J. Pearlman, Ilene G. Block,

Howard M. Blumenthal, and Gordon L. Lang, and economist

Richard A. Ippolito of the Division's Economic Policy

Office, under the direction of Dr. George Hay.

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Final approval of the Report was given by Donald I.

Baker, Assistant Attorney General of the Antitrust Division.

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Conclusions
The Competitive Alternative
A Proposal

340 351 359

seption

IV.

FEDERAL ANTITRUST POLICY

SUMMARY

Exchange of cost and Price Information Joint Ventures

This is a summary of the Justice Department's repo

the Task Group on Antitrust Immunities on the effects o

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state regulation on the pricing and distribution of insurance since the enactment of the McCarran-Ferguson AC

Private Passenger Auto Insurance

Existing Pricing Process
Potential Pricing Process

1945.

.

1. Background

Commercial Fire Insurance

Traditionally, the regulation of insurance had bee

Existing Pricing Process Potential Pricing Process

ceded to the states by the federal government.

However

Workman's Compensation

1944, the Supreme Court held that the sale of propertyliability insurance was in interstate commerce and sub

to the provisions of the federal antitrust laws.

Unite

Special Problem Lines

Title Insurance
Credit Life and Credit Health

Insurance
Life Insurance

States v. South-Eastern Underwriters Association, 322 L

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533. That decision made illegal the numerous privatec rate-fixing agreements which had determined prices in t property-liability field and raised questions as to the validity of the various types of state regulation of ir

The next year Congress enacted the McCarran-Fergus Act which ratified the states' power to regulate insura absent specific federal insurance legislation and provi an antitrust exemption for private concerted price-fixi activities which were subject to state regulation.

The antitrust exemption was justified on the ground that cc

Producers' Commissions
Collective Merchandising .
Classification and Selection of Risks

VII. CONCLUSIONS AND RECOMMENDATIONS

Conclusions
The Competitive Alternative
A Proposal

(iii)

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