The United States Supreme Court has made clear that the scope of the general exemption is broad, while the scope of the antitrust exemption is more limited.
According to this Act, the states are given the authority to regulate the "insurance business." The regulation of the insurance business will be without the interference of the federal regulation. Unless the federal law specifically provides any regulation, there will be no interference of the federal regulation.
The act provides that the "business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business." The McCarran Ferguson Act was passed by the congress which was in response to the case at the Supreme Court. The case at the court was of United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S. Ct. 1162, 88 L. Ed. 1440 (1944). Prior to this case, the issuance of an insurance policy was not considered as a commercial transaction, which according to the federal regulation would fall under the COMMERCIAL CLAUSE. It was held by the court that an insurance company that conducted substantial business across state lines was engaged in interstate commerce and thus was subject to federal antitrust regulations.
Within a span of one year from the Southeas...
Within a span of one year from the Southeastern Underwriters, the McCarran Ferguson Act was enacted by the Congress. The Congress also stated that, no longer would the insurance industry would be regulated by them within their boundaries.
The McCarran-Ferguson Act provides that state law shall govern the regulation of insurance and that no act of Congress shall invalidate any state law unless the federal law specifically relates to insurance. The act thus mandates that a federal law that does not specifically regulate the business of insurance will not PREEMPT a state law enacted for that purpose. A state law has the purpose of regulating the insurance industry if it has the "end, intention or aim of adjusting, managing, or controlling the business of insurance"
Limited Antitrust Exemption under the McCarran Ferguson Act
The limited antitrust exemption under McCarran-Ferguson allows insurers to pool historic loss information so that they are better able to project future losses and charge an actuarially based price for their products. It also allows for joint development of policy forms.
The act does not exempt insurers from state antitrust laws, which explicitly prohibit insurers (and all businesses), from conspiring to fix prices or otherwise restrict competition. The McCarran-Ferguson Act in no way results in any kind of restraint on competition.
Under the act, insurers remain subject to rate and form regulation in every state.
The home-owners policies cover all sorts of perils and hence are believed to be a federal regulator.
The act's exemption applies only if three conditions are met:
1. The insurer's action pertains to the business of insurance.
2. The action must be regulated by state law.
3. The action must not be designed to boycott, coerce or