The Insurance Industry's Antitrust Immunity

24 Pages Posted: 16 Oct 2009 Last revised: 29 Jan 2010

See all articles by Herbert Hovenkamp

Herbert Hovenkamp

University of Pennsylvania Carey Law School; University of Pennsylvania - The Wharton School

Date Written: January 23, 2010


The 1945 McCarran-Ferguson Act provides that federal legislation generally, including the antitrust laws, is “applicable to the business of insurance [only] to the extent that such business is not regulated by State law.” The statute was enacted after United States v. South Eastern Underwriters Assn. (1944), held that insurance transactions were “interstate commerce” and thus subject to the antitrust laws. That case had in turn undermined the traditional view expressed in Paul v. Virginia (1868), that insurance was not interstate commerce, but strictly local transactions. The South Eastern case followed in turn upon the Supreme Court's decision in Wickard v. Filburn (1942), which had greatly expanded the reach to relatively local activities of federal statutes passed under the Commerce Clause. Under the McCarran-Ferguson Act Congress thus relinquished its power to regulate to the states, provided that the states did at least a modicum of regulation themselves. The immunity applies equally to all federal statutes not intended to regulate the insurance industry, including the Federal Trade Commission (FTC) Act.

As a matter of history, the jurisdictional rationales for McCarran-Ferguson are obsolete. Today insurance is a national rather than statewide industry and numerous companies write insurance in nearly every state. Economically, however, the immunity may continue to serve a purpose. Most but not all portions of insurance industry are characterized by a large number of firms and low entry barriers. Further, the industry depends critically on shared information, including statistical loss data and common coverage, or standardized forms. As a result, many practices that might be misunderstood as collusive are in fact quite procompetitive. Further, as this paper demonstrates, the case law has tended to find the immunity in cases that involve true anticompetitive practices, and they have tended not to find it with respect to vertical relationships, product provision, or other areas where competition was not threatened.

Keywords: antitrust, insurance, immunity, McCarran-Ferguson, cartel

JEL Classification: K20, K21, K23

Suggested Citation

Hovenkamp, Herbert, The Insurance Industry's Antitrust Immunity (January 23, 2010). U Iowa Legal Studies Research Paper No. 10-03, Available at SSRN: or

Herbert Hovenkamp (Contact Author)

University of Pennsylvania Carey Law School ( email )

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319-512-9579 (Phone)

University of Pennsylvania - The Wharton School ( email )

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Philadelphia, PA 19104-6365
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