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Under the Dome by Joel WoodOne Angry Man

Our Lott in life includes a loud megaphone and decrying liars, knaves, pirates and rascals. It may be forgotten a decade from now. Or maybe not.

Watching Sen. Trent Lott, R-Miss., tear into the “outrageous, arrogant and mean-spirited” insurance industry in a recent Senate Commerce Committee hearing, I was reminded of another industry critic with a megaphone. Fourteen years ago, it was Rep. John Dingell, D-Mich., then chairman of the House Energy and Commerce Committee, decrying the industry’s “liars, knaves, pirates and rascals.”

With the advantage of hindsight, it is clear that Dingell did justice to the industry and its regulators. Carefully dissecting the criminality and ensuing regulatory negligence surrounding several carrier failures, Dingell made the case that solvency was paramount and that the 50-plus state regulatory regime was poorly equipped to assure it. He pioneered the first legislative proposal to create an optional federal charter for insurers, brokers and agents. Just as today, that proposal drives a wedge into the industry, with larger companies and producers generally favoring it and the smaller players fervently opposed.

The target of Lott’s outrage is different: The “robber barons” of the industry, he believes, unjustly denied claims stemming from Hurricane Katrina. Unlike Dingell’s rifle-shot effort on solvency, Lott has a shotgun, and he’s aiming it every which way. (No, I won’t make a Dick Cheney joke here.) In a now-famous call last year to the head of the National Association of Mutual Insurance Companies (one of whose members is State Farm), Lott said he was going to dedicate his next term of office toward “bringing down State Farm and the industry.”

Lott has filed or co-sponsored multiple bills to punish the industry, including repeal of the industry’s McCarran-Ferguson antitrust immunity; a bill requiring insurers to put a cover sheet on every policy form indicating what is and isn’t covered; and another bill to require insurers to track flooded “Katrina cars.” He also plans to fight renewal of the federal terrorism reinsurance backstop. Perhaps more importantly, as a member of the Senate Finance Committee, he’s said to be looking at ways to increase insurers’ taxes.

It would be fascinating to look into a crystal ball to see whether 14 years from now the furor turns out as bad as it looks today.

At the same time that Dingell was digging deep on solvency and regulatory reform, his then-colleague Rep. Jack Brooks, D-Texas, chairman of the House Judiciary Committee, was pressing a bill to repeal McCarran, an effort that fizzled when Brooks and House Democratic control went down in flames in 1994.

The issue has returned with a vengeance. While many national carriers would gladly give up antitrust immunity in exchange for an optional federal regulator, the Lott bill (introduced in both the House and Senate) would superimpose Federal Trade Commission and Justice Department oversight on top of state regulation.

The bad news for the industry on McCarran is that opponents enjoy the rhetorical edge. Why shouldn’t the insurance industry be subject to the same scrutiny as every other industry? As convinced as I am that the limited immunity is pro-competition, I’ve yet to hear 30-second sound bites as good.

The good news for the industry is that McCarran repeal/reform is a quagmire, with multiple committees of jurisdiction in both chambers and numerous legislative challenges. My bet is that many of my lobbyist colleagues will make their bonuses this year not for anything they got enacted, but for what they stalled.

I believe the nasty coastal debate (aside from broker comp, the most difficult I’ve experienced in public policy) is more likely to negatively affect the things we’re trying to get done, as opposed to resulting in new bad things being enacted. When we look back a decade from now, will it have galvanized, or dampened, the debate over creating an optional federal regulator consistent with the dual banking regulatory structure?

I could argue the politics either way. For the most part, I think this is a terrible environment for the industry to seek preemption of state laws that—justified or not—were enacted in the name of consumer protection. But the environment is highly combustible.

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