Unlike most other closely-regulated industries, insurance companies are regulated by the various states rather than the federal government. This unique circumstance results from a law – known as the McCarran-Ferguson Act – enacted by Congress in 1945. This law delegates regulatory authority from Congress to the states while preserving federal prerogative to pass laws regulating the business of insurance.
A significant provision of the McCarran-Ferguson Act provides that federal laws that may regulate other businesses and activities do not apply to insurance companies unless they expressly regulate the business of insurance by their terms. This provision helps to preserve the delegation from Congress and protects against dual or conflicting state and federal regulations.
Another significant, but often misunderstood, provision of McCarran-Ferguson provides that federal anti-trust laws will not apply to the business of insurance as long as the state has enacted regulation in that area. However, federal anti-trust laws prohibiting boycott, coercion and intimidation always apply to insurance companies. In large part, the anti-trust provisions of McCarran-Ferguson were designed to permit the states to regulate rating bureaus that compiled industry-wide loss data in order to help determine appropriate rate levels.
Regulation by the states under McCarran-Ferguson has proven very effective, if sometimes unwieldy, at ensuring the solvency of insurance companies across the country. MIC supports thoughtful insurance laws designed to ensure a vibrant and safe insurance marketplace in which financially sound insurance companies provide their customers peace of mind.
- The McCarran Ferguson Act, 15 U.S.C. 1011
- United States vs. South-Eastern Underwriters Association, 322 U. S. 533, 1944