Guides for the Mail Order Insurance Industry

FEDERAL TRADE COMMISSION

16 CFR Part 234

Guides for the Mail Order Insurance Industry

AGENCY: Federal Trade Commission.

ACTION: Elimination of guides.

-----------------------------------------------------------------------

SUMMARY: The Guides for the Mail Order Insurance Industry were adopted

in 1964 to prevent deception of purchasers of insurance and maintenance

of fair competition by out-of-state mail order sellers of insurance.

Since issuance of the Guides, state insurance laws have changed

significantly. The states, through their licensing powers, now regulate

out-of-state mail order sellers of insurance. Those regulations cover

most, if not all, of the substantive areas addressed by the Guides.

These facts appear to make the Guides unnecessary. Because of these

changed circumstances, the Commission has determined that it is in the

public interest to eliminate the Guides for the Mail Order Insurance

Industry. The Commission further has determined that, because the

reasons to revoke the Guides are ample and not in controversy, it is

unnecessary to seek comment. This action is not to be understood as a

statement that the principles announced in the Guides do not reflect

the requirements of Section 5 of the Federal Trade Commission Act, 15

U.S.C. 45.

EFFECTIVE DATE: August 8, 1995.

ADDRESSES: Requests for copies of this notice should be sent to the

Public Reference Branch, Room 130, Federal Trade Commission,

Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Matthew Daynard or Walter Gross, Division of Service Industry

Practices, Bureau of Consumer Protection, Federal Trade Commission,

Washington, DC 20580, (202) 326-3291 or (202) 326-3319.

SUPPLEMENTARY INFORMATION: The Guides for the Mail Order Insurance

Industry were issued on May 15, 1964.\1\ Designed to prevent deception

and the maintenance of fair competition in the out-of-state mail order

insurance industry, the Guides prohibit several forms of potential

misrepresentation in advertising concerning the benefits, conditions,

terms, identity, and claims paid for any insurance policy; the

identity, standing in the industry, or financial condition of the

insurer, and the disparagement of competitors or competitors' policies,

services, or business methods.

\1\ 29 FR 6381 (1964).

---------------------------------------------------------------------------

As a part of its periodic review of the regulatory and economic

impact of the Commission's rules and guides, the Commission reviewed

the current status of state laws regulating mail order insurance

sellers to determine whether there was a need to retain or remove the

Guides. That review indicates that state insurance laws have changed

substantially since the Guides were adopted in 1964.

All states have enacted some version of the model Unfair Trade

Practices Act for insurance (National Ass'n of Insurance

Commissioners). Those laws cover most, if not all, of the substantive

areas covered by the Guides. In addition, at least 49 states have

adopted the Nonadmitted Insurance Act (1983) (National Ass'n of

Insurance Commissioners), or similar legislation, which: (1) Provides

that no insurer shall transact business in the state, whether by mail

or otherwise, without first obtaining a license; and (2) authorizes the

state regulatory authority to require compliance with all state

insurance laws as a condition of licensing. If licensing requirements,

including compliance with the state's Unfair Trade Practices Act, are

not met, the state can suspend or revoke the license.

These changes in state insurance laws appear to make the Guides'

provisions unnecessary. Accordingly, the Commission has determined that

it is in the public interest to eliminate the Guides.

List of Subjects in 16 CFR Part 234

Advertising, Insurance, Postal Service, Trade practices.

PART 234--[REMOVED]

The Commission, under authority of sections 5 (a)(1) and 6(g) of

the Federal Trade Commission Act, 15 U.S.C. 45(a)(1) and 46(g), amends

chapter I of title 16 of the Code of Federal Regulations by removing

Part 234.

By direction of the Commission.

Donald S. Clark,

Secretary.

Statement of Commissioner Mary L. Azcuenaga Concurring in 16 CFR Part

14, Matter No. P954215; Repeal of Mail Order Insurance Guides, Matter

No. P954903; Repeal of Guides Re: Debt Collection, Matter No. P954809;

and Free Film Guide Review, Matter No. P959101

In a flurry of deregulation, the Commission today repeals or

substantially revises several Commission guides and other

interpretive rules.\1\ The Commission does so without seeking public

comment. I have long supported the general goal of repealing or

revising unnecessary, outdated, or unduly burdensome legislative and

interpretive rules, and I agree that the repeal or revision of these

particular guides and interpretive rules appears reasonable.

Nevertheless, I cannot agree with the Commission's decision not to

seek public comment before making these changes.

\1\ Administrative Interpretations, General Policy Statements,

and Enforcement Policy Statements, 16 C.F.R. Part 14; Guides for the

Mail Order Insurance Industry, 16 C.F.R. Part 234; Guides Against

Debt Collection Deception, 16 C.F.R. Part 237; and Guide Against

Deceptive Use of the Word ``Free'' In Connection With the Sale of

Photographic Film and Film Processing Services, 16 C.F.R. Part 242.

---------------------------------------------------------------------------

Although it is not required to do so under the Administrative

Procedure Act, 5 U.S.C. 553(b)(A), the Commission traditionally has

sought public comment before issuing, revising, or repealing its

guides and other interpretive rules. More specifically, the

Commission adopted a policy in 1992 of reviewing each of its guides

at least once every ten years and issuing a request for public

comment as part of this review. See FTC Operating Manual ch. 8.3.8.

The Commission decided to seek public comment on issues such as:

(1) The economic impact of and continuing need for the guide;

(2) changes that should be made in the guide to minimize any adverse

economic effect; (3) any possible conflict between the guide and any

federal, state, or local laws; and (4) the effect on the guide of

technological, economic, or other industry changes, if any, since

the guide was promulgated.

Id. The Commission has sought public comment and has posed these

questions concerning a number of guides since adopting its

procedures for regulatory review in 1992.\2\

\2\ See, e.g., Request for Comments Concerning Guides for the

Hosiery Industry, 59 FR 18004 (Apr. 15, 1994); Request for Comment

Concerning Guides for the Feather and Down Products Industry, 59 FR

18006 (Apr. 15, 1994).

---------------------------------------------------------------------------

Notwithstanding its long-standing, general practice of seeking

public comment and its

[[Page 40263]]

specific policy of seeking public comment as part of its regulatory

review process, the Commission has chosen not to seek public comment

before repealing or revising these guides and interpretive rules.

Why not? Has the Commission changed its view about the potential

value of public comment? Perhaps the Commission knows all the

answers, but then again, perhaps not. Although reasonable arguments

can be made for repeal or revision of these guides and interpretive

rules, public comment still might prove to be beneficial.

In addition, the relatively short period of time that would be

required for public comment should not be problematic. The

Commission has not addressed any of these guides or interpretive

rules in the last ten years. Indeed, it has not addressed some of

them for thirty years or more. For example, the Commission

apparently has not addressed the interpretive rule concerning the

use of the word ``tile'' in designation of non-ceramic products

since it was issued in 1950.\3\ The continued existence of these

guides and interpretive rules during a brief public comment period

surely would cause no harm because they are not binding and because,

arguably, they are obsolete. I seriously question the need to act so

precipitously as to preclude the opportunity for public comment.\4\

\3\ 16 C.F.R. 14.2.

\4\ Unfortunately, seeking public comment would not permit the

Commission to count the repeal and revision of these guides and

interpretive rules in its tally of completed actions in the

Regulatory Reinvention Initiative Report that will be sent to the

President on August 1, 1995, but perhaps that harm could be

mitigated by reporting to the President that the Commission is

seeking public comment concerning repeal or revision.

---------------------------------------------------------------------------

In 1992, the Commission announced a careful, measured approach

for reviewing its guides and interpretive rules, and public comment

has been an important part of that process. Incorporating public

comment into the review is appropriate and sensible. Although I have

voted in favor of repealing or revising these guides and

interpretive rules, I strongly would have preferred that the

Commission seek public comment before doing so.

[FR Doc. 95-19541 Filed 8-7-95; 8:45 am]

BILLING CODE 6750-01-M