Which law exempts insurance from most federal regulation and places it under state authority?

• A. Insurance Regulatory Act
• B. McCarran-Ferguson Act
• C. Fair Insurance Practices Act
• D. State Insurance Act

Answer: (B)

The McCarran-Ferguson Act is pivotal because it recognizes the unique nature of the insurance industry and provides that the regulation of insurance should primarily reside with the states rather than the federal government. Enacted in 1945, this law was a response to concerns about federal overreach and aimed to ensure that states could continue to effectively regulate insurance policies, rates, and practices in their jurisdictions.

By affirmatively stating that "no act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any state for the regulation of the business of insurance," the McCarran-Ferguson Act allows states to maintain control over all facets of the insurance industry, including market conduct and consumer protections. This self-regulatory framework has encouraged states to develop tailored regulations that address the needs of their residents and local markets. Moreover, it helps to facilitate a competitive environment focused on consumer choice and innovation.

In summary, the McCarran-Ferguson Act is the correct answer because it enshrines state authority over the regulation of the insurance industry, exempting it from most federal interventions, and underscores the importance of state-specific approaches to insurance oversight.