AD Banker Comprehensive Practice Exam

Which act established the Federal Government's right to regulate the insurance industry about fraud and false statements in insurance transactions?

1. TAMRA Act

2. McCarran-Ferguson Act

3. HIPAA Act

4. COBRA Act

The correct answer is: McCarran-Ferguson Act

The McCarran-Ferguson Act is the legislation that established the federal government's right to regulate the insurance industry specifically regarding issues of fraud and false statements in insurance transactions. This act, passed in 1945, allows states to regulate insurance businesses but also affirms the federal government's authority to intervene when it comes to fraudulent practices that may harm consumers. The act recognizes the unique nature of the insurance industry, acknowledging that while states primarily regulate insurance, the federal government retains an interest, particularly in preventing fraud and protecting the integrity of the insurance market. This creates a framework where both state and federal regulations can coexist, with a focus on ensuring that insurance practices are fair and transparent. In contrast, the other options listed—such as the TAMRA Act, HIPAA Act, and COBRA Act—address different areas of legislation. The TAMRA Act relates to the taxation of certain retirement accounts, HIPAA focuses on health insurance coverage and patient privacy, and COBRA deals with the continuation of health coverage after employment ends. None of these directly pertain to the regulation of the insurance industry concerning fraud and false statements, which reinforces why the McCarran-Ferguson Act is the relevant legislation in this context.