What does the McCarran-Ferguson Act allow the federal government to do?

The McCarran-Ferguson Act was enacted in 1945 and establishes the principle that states have the primary authority to regulate the insurance industry. The correct answer reflects that the federal government can only regulate insurance if states do not adequately do so. This means that federal action is permitted if a state fails to provide adequate oversight or if there are broader national interests at stake, such as in cases of anti-competitive behavior or major disasters.

By allowing states to maintain their regulatory frameworks while reserving some federal authority, the Act acknowledges the historical practice of state regulation in the insurance sector. This balance between state and federal powers is crucial, as it permits states with established expertise in insurance regulation to continue operating without unnecessary federal interference, unless absolutely necessary.

The other choices mistakenly imply a greater level of federal control over insurance than what the McCarran-Ferguson Act actually permits, thus highlighting the importance of this legislation in preserving state sovereignty in the insurance industry.