The 79th Congress enacted Public Law 15, better known as the McCarran-Ferguson Act of 1945 (hereafter “McCarran”).[1] The Act provides a narrow exemption from federal antitrust laws, and pertains only to activities that (1) constitute the “business of insurance,” (2) are “regulated by State law,” and (3) do not constitute “an agreement to boycott, coerce or intimidate or an act of boycott, coercion or intimidation.” 

In practice, McCarran permits several activities conducted by insurance companies that would otherwise be prohibited or subjected to scrutiny under the federal antitrust laws.  Perhaps the most significant consequence of the Act is that it permits insurers to pool data through independent statistical agents, who produce advisory loss costs to aid insurers in the ratemaking process. It also allows standardization of risk classification and policy forms, and joint underwriting ventures. Each of these functions benefits consumers by promoting financial strength, efficiency and competition in insurance markets.

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