Foundations of State Insurance Regulation: An Analysis of Motivations for the McCarran-Ferguson Act

The current state-run regulatory system for the U.S. insurance industry grows out of the McCarran-Ferguson Act passed by Congress in 1945, which not only ceded all regulatory authority over insurance to the states, but also exempted the industry from most federal antitrust law. Coming on the heels of the New Deal -- a landmark period in the shift of power from the states toward the federal government -- this decision was striking. This paper examines possible motivations for this decision, arguing that it most likely reflected the power of insurance industry officials who did not want to give up the "capture" they had already established over state regulators.