It's June 1944. General Dwight D. Eisenhower is in the final planning stages of launching the largest sea-borne invasion in the history of the world. As he confers with his staff and the staff of the Allied forces, and the men prepare for battle on the beaches of Normandy — the United States Supreme Court is in the act of determining policy that will shape the insurance industry for generations.

McCarran-Ferguson Act

On that June day, the Supreme Court handed down its decision on United States v. South-Eastern Underwriters Association. The Supreme Court ruling put into motion the regulation of insurance, holding that insurance companies were subject to the Sherman Anti-Trust Act. On March 9, 1945, Congress passed the McCarran-Ferguson Act, thus creating the regulatory framework that has been guiding the insurance industry since.

The McCarran-Ferguson Act created these main areas of regulation:

• A partial exemption for insurance companies from the federal antitrust legislation that applies to most businesses.
• Provision for states to regulate insurance.
• Provision for states to establish mandatory licensing requirements.
• Preservation of certain state laws on insurance.

To fully understand the reasons for McCarran-Ferguson, one has only to read about the business practices employed by Southeastern Underwriters, and compare them with what we take for granted today.