The McCarran-Ferguson Act

The McCarran-Ferguson Act was adopted in 1945 after extended controversy over the jurisdiction of state and federal governments in regulating the business of insurance. The principal objective of the Act was to establish the primacy of the states in regulating the industry. The purpose clause of the Act states that the continued regulation and taxation of the business of insurance by states are in the public’s best interest.

The McCarran-Ferguson Act urged the individual states to preempt the federal anti-trust laws. The McCarran-Ferguson Act did not really return the regulation of insurance rates entirely to the individual states. It merely exempted the insurance industry from federal anti-trust legislation to the extent that the insurance business is actually regulated by state law.

Soon there was a great deal of pressure from the insurance industry on the states to assume full responsibility for their own insurance regulation, especially in relation to rating. This move was intended to avoid the threat of federal anti-trust regulation. The states again prevailed as being responsible for regulating insurance within their own jurisdictions. Make sure the font in this paragraph is changed to 11 pt…half of it was in 12 pt.