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last updated on March 23, 2009

The McCarran-Ferguson Act

There are efforts in Washington, D.C., to change or repeal the limited antitrust exemptions in the McCarran-Ferguson Act.

NAMIC OPPOSES any changes to, or repeal of, the existing antitrust exemptions afforded under the McCarran-Ferguson Act, which could undermine competition and limit consumer choice. Congress should be wary of the unintended consequences of changes to the current limited antitrust exemption.

BACKGROUND

The McCarran-Ferguson Act, approved by Congress in 1945, entrusts states with the authority and responsibility for the regulation of the business of insurance. The McCarran-Ferguson Act does not include a blanket exemption from antitrust laws, but provides a targeted exemption for certain limited insurance activities. The exemption is limited to activities that constitute the “business of insurance,” are “regulated by State law,” and do not constitute “an agreement to boycott, coerce or intimidate or an act of boycott, coercion or intimidation.” Like other exemptions from antitrust laws, this exemption is construed narrowly and has been subject to extensive court interpretation during the past 60 years.

Under the regulatory regime established by the McCarran-Ferguson Act, insurers are subject to a vibrant, comprehensive state-level system of regulation and antitrust enforcement. States regulate virtually every aspect of insurance from licensing to market practices to financial solvency, and all insurance activity is subject to regulatory supervision. In addition, every state has an Unfair Trade Practices Act providing authority to investigate, and if appropriate, correct and punish a variety of unfair practices.

The McCarran-Ferguson Act establishes a careful and efficient balance between regulation and antitrust enforcement for the state-regulated insurance industry and ensures parity with other financial services industries. The existence of the narrow antitrust exemption provided by the McCarran-Ferguson Act promotes competition in the insurance marketplace by allowing companies to exchange critical data regarding losses and other factors, allows development of standardized policy language, facilitates participation and oversight of state guaranty funds, permits state control over liquidations, and enables the development and operation of assigned risk plans.

The existence of the McCarran-Ferguson limited antitrust exemption serves to make the industry more competitive, not less. Repeal or limitation of the McCarran-Ferguson limited exemption would reduce competition, increase insurance costs, and reduce availability for some high-risk coverages. Specifically, changes could imperil the ability of insurers to exchange critical data, endangering market participation by smaller insurers and making it more difficult for carriers to enter new markets. Threats to standardization of policy language would make it more difficult for consumers to compare policies as well as prices and barriers to operation of assigned risk plans and guaranty funds would undermine the functioning of insurance markets.

The McCarran-Ferguson Act has worked well for decades to maintain a vigorous and competitive marketplace for America’s consumers and should be preserved.

CONTACT INFORMATION

For more information please contact Marliss McManus, senior federal affairs director, at (202) 628-1558 or mmcmanus@namic.org.

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