I am about sneak away from my ivory tower and spend some time
at the lake in the real world. There is a distinct lack of broadband at the the lake, so posting will be light. However, before I go I'd like to link to some testimony on the status of the McCarran-Ferguson Act (the one that grants insurance an antitrust exemption) from a Congressional hearing held yesterday.
Absolutely nothing new that hasn't been said a million times before was said yesterday. As a matter of public policy there should be no antitrust exemptions. This was said by just about everyone. The lone dissenter was the gentleman from the Insurance Services Office (ISO). While his opinion is different the story of the ISO is also interesting.
The ISO makes money, in part, by calculating expected loss costs for companies. In doing so it uses information supplied from a number of companies. The ISO was sued in the 1980s for allegedly helping insurers collude because it was also suggesting final prices. Today as a result of a antitrust lawsuit just calculates, for example, the expected losses (based on historical data) one might expect on a $250,000 brick house, built in 1958, in a city with good fire protection services using an HO-3 Policy with a $500 deductible. Information sharing may or may not lead to collusion, but if we were to prohibit information sharing the industrial structure of the insurance industry would change. Small companies which could not out source their actuarial calculations to the ISO might have to spend a ton of money on actuaries and data collection (or leave the business) in order to compete.
Our favorite consumer dis-advocate (Mr. Hunter) thinks we should get rid of the exemption because he wants to see more prosecutions especially in those areas where insurance is hard to get (i.e. Gulf Coast). I think Florida regulates prices and other behaviors so strictly that there is not likely to be any grounds for an antitrust lawsuit. However, threats to sue just make the environment less inviting for homeowners insurers.
via Auto Muse