The National Board of Fire Underwriters, as discussed in yesterday’s post, “The National Board of Fire Underwriters: The Insurance Cartel that Built Modern Property Insurance,” did not simply help build the modern insurance marketplace. It helped design a system that could operate with remarkable coordination while resisting meaningful oversight. That is not a modern accusation. It is a historical fact found in the sworn testimony and evidence before Congress in 1943. 1 The United States Attorney General, Francis Biddle, explained exactly how the insurance industry behaved when confronted with regulation from states or the federal government.
What Biddle described should sound familiar to anyone following today’s insurance debates. Insurance companies did not just argue against regulation. They shifted positions depending on which regulator posed the greatest threat. When states attempted to regulate rates and practices, insurers challenged those laws as unconstitutional. When the federal government sought to apply antitrust laws, the same companies suddenly insisted insurance was local and beyond federal reach. Biddle disclosed that this strategy warned Congress that the industry’s objective was to avoid both systems entirely. He said the goal of insurance companies was to create what he called a “no man’s land” where neither state nor federal law effectively applied. Biddle stated:
[T]he purpose of my statement is to show that the insurance companies have always fought State regulation. This was a fight against State regulation; and now their position is entirely opposite to that, they are fighting Federal regulation. What the insurance companies want is no regulation, they want a no man’s land in which neither law is applicable. 2
This was not rhetoric. It was supported by evidence of conduct familiar to any antitrust lawyer. A nationwide network of over a thousand insurance associations and bureaus coordinated rates, enforced compliance, and punished deviation. Agents and brokers who dared to step outside the system faced boycotts. Companies that refused to conform could be denied reinsurance, which was far more necessary to purchase under the rules those companies set through the rating bureaus. Companies could be effectively forced out of the market if they did not comply. These were not isolated abuses. They were structural features of how the insurance system operated.
Perhaps most troubling is that this coordinated conduct was paired with a long-term legal strategy. The industry did not passively rely on favorable legal precedent. It actively shaped it. Biddle revealed that insurers supported and financed litigation, including test cases, designed to invalidate state laws and influence how courts viewed insurance under the Constitution. At one point, as he recounted, the National Board of Fire Underwriters prioritized “proposing some practicable plan to rid the country of unfair State legislation.” That statement is not ambiguous. It reflects a deliberate effort to dismantle regulatory constraints.
All of this unfolded at the very moment Congress was deciding whether federal antitrust laws should apply to the insurance industry. The record before Congress showed excessive and discriminatory rates, suppression of competition, coercion of agents, and a market dominated by a relatively small number of powerful insurance companies. Yet the result was not robust federal oversight. Instead, Congress enacted a framework that largely deferred to the states, even though the evidence showed state regulation was often ineffective. Biddle noted instances where proposed state regulations were compromised by the powerful insurance lobby.
The same structural concerns have not disappeared. The names of the organizations have changed, but the mechanisms of coordination through shared data, advisory organizations, industry groups, and collective practices remain central to how modern-day insurance operates. The lobbying strength that once influenced state legislatures to block reform has not diminished. If anything, it has become larger, more coordinated, and certainly more sophisticated.
If the insurance regulatory system struggled to produce effective consumer protection in 1943, why should we assume it is working optimally today? Transparency in ratemaking, claims handling, and internal decision-making remains limited. Efforts to strengthen consumer protections at the state level often encounter the same political resistance described in those hearings more than eighty years ago.
We need greater regulatory balance. Greater transparency requirements should be enacted in more states so that policyholders, regulators, and courts can better understand how decisions are made. Just as importantly, there should be serious consideration of a federal insurance whistleblower statute. When insiders have credible evidence of coordinated misconduct or systemic abuse, there should be a clear, protected path for that information to come forward. Relying solely on state-based enforcement mechanisms, particularly where lobbying pressures remain strong, has historically proven insufficient.
History does not repeat itself in identical form, but it often rhymes. The 1943 hearings reveal an industry capable of organizing itself with precision while resisting oversight with equal determination. This resistance has not gone away. Ignoring it does not make it disappear. Addressing it requires the same willingness that Congress had then, to look beyond labels like “state regulation” or “federal overreach” and focus on whether the insurance regulatory system truly protects the public it is supposed to serve.
Thought For The Day
“What the insurance companies want is no regulation, they want a no man’s land in which neither law is applicable.”
– Attorney General Francis Biddle
1 Insurance: Joint Hearing before the Subcommittees of the Committees on the Judiciary. 78th Cong. (1943).
2 Id. (Testimony of Francis Biddle, p. 29).