State or Federal Regulation of Insurance

The Hill has an interesting report suggesting that legislation that would call for the regulation of insurance at the federal level has divided the industry, with some insurance groups favoring and others opposing the bill.

Historically, the insurance industry in the United States has been regulated at the state level. After World War II, the U.S. Supreme Court ruled that insurance was interstate commerce and should be regulated by the federal government. As there was no federal law governing the insurance industry specifically, the decision created something of a crisis that was resolved by the McCarron Ferguson Act, which provided that the regulation of insurance would be delegated to the states as long as state regulation was deemed adequate.

For the most part, insurers have favored such as a resolution, as they have feared the creation of a massive federal behemoth governing their industry. However, in spite of the efforts of the National Association of Insurance Commissioners to keep insurance regulation somewhat uniform, requirements vary significantly from state to state, thus creating administrative difficulties for companies operating in multiple jurisdictions. An attorney for an insurer told me nearly a decade ago that for that reason he was beginning to think that federal regulation would be preferable, though he feared he was committing heresy by saying so.

The debate over this, should the legislation gain traction, should be interesting.