Texas All Lines Adjuster Practice Test

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What does the McCarran-Ferguson Act pertain to?

Regulating marine insurance
Exempting insurance from federal regulation
Setting standards for malpractice insurance
Regulating consumer rights in insurance

The correct answer is: Exempting insurance from federal regulation

The McCarran-Ferguson Act, enacted in 1945, serves a critical function in the relationship between federal and state regulation of the insurance industry. Specifically, it exempts insurance companies from federal regulation under the Sherman Act, as long as the states are actively regulating insurance. This means that states have greater authority to regulate insurance practices without the concern of being overridden by federal law. The intent of the Act was to recognize the importance of state oversight in ensuring that insurance markets operate competitively and in the best interest of consumers. This exemption highlights the belief that state regulation was more suitable for addressing the unique complexities of the insurance industry compared to federal intervention. By allowing states to maintain their regulatory authority, the McCarran-Ferguson Act effectively preserves a decentralized regulatory environment that has been vital to the operation of the insurance marketplace in the United States.