Greater Regulation

During the mid-1800's, many states began to establish insurance departments and to pass laws regulating the insurance industry as a result of dishonesty by some companies. However, insurance laws frequently were not strictly enforced.

During the late 1800's, the industry was plagued by scandals caused by the dishonest and irresponsible practices of many companies. In the early 1900's, many states passed laws that regulated the activities of insurance companies more strictly.

In 1935, Congress passed the Social Security Act to provide old-age benefits and unemployment compensation. In the early 1940's, during World War II, the federal government prohibited wage increases in most industries. Many employers then began to offer their employees various benefits, including group life and health insurance.

In 1944, the Supreme Court of the United States ruled that insurance was interstate commerce and so was subject to federal regulation. However, the McCarran-Ferguson Act, passed by Congress in 1945, left regulatory power to the states.

During the late 1900's, more than 10 states had adopted no-fault automobile insurance plans. Many states also passed laws requiring insurance companies to provide potential buyers with complete information about the costs and benefits of their policies. In addition, companies in some states no longer could use such factors as sex, age, marital status, or place of residence to determine premium rates for certain types of insurance.

In 1996, the U.S. government enacted a law to guarantee workers the ability to get health insurance after they change or lose their jobs. Before the law was enacted, many insurance companies had refused to cover people who already had a health problem. As a result, many people could not get private health insurance, or could not move to a new job without losing their coverage.

The law, which took effect in 1997, also called for raising the percentage of health insurance costs that self-employed people could deduct from their income when figuring their federal income tax. The law provided for raising this percentage from 30 to 80 percent by the year 2006. Despite this law, many millions of Americans still have no health insurance.