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The Actuary The magazine of the Institute & Faculty of Actuaries

Regulating US insurance

The article on the US P&C market in December’s issue contains a statement that is not quite right: ‘Before the McCarren (sic) Ferguson Act the federal government played a big role in the regulation of insurance.’ Without going into an extensive discourse on US constitutional law, the US constitution allows the federal government to regulate interstate commerce. An 1869 Supreme Court case held that insurance was not ‘commerce’ and therefore not interstate commerce. As a result insurance was mostly regulated at the state level.

In 1944 the court reversed itself and ruled that insurance was commerce. McCarran-Ferguson was enacted to maintain the state-level regulation (except as regards certain federal anti-trust laws).

The article also opines that premium rate regulation is the most important role performed by the state insurance regulators. One might argue that insurer and producer licensing and insurer financial examination provide much greater benefits to the public.