In its South-Eastern Underwriters Association decision, the Supreme Court made it clear that the federal government has the ultimate authority to regulate the interstate aspects of the insurance business. Although Congress decided initially to vest this authority with the states, it reserved the right to oversee state regulation of insurance and to change such authority in whatever areas, in whatever ways, and at whatever time it believed appropriate.

State authority and regulatory exclusivity did not remain unchallenged. Although private parties resorted to the judicial forum to avoid state controls, generally unsuccessfully, the most serious and persistent early challenges to the applicability of the McCarran Act arose from two federal agencies, the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC). In the FTC Act, Congress declared "[u]nfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce" illegal and created the FTC as the regulatory agency to enforce the law. This statutory proscription served as the model for the basic proscription in the NAIC Unfair Trade Practices Act. Thus if the FTC Act were applicable to insurance, federal and state law would cover the same ground.

Following the adoption of the McCarran Act, which contains a major proviso that the federal antitrust law (including the FTC Act) applies to the business of insurance to the extent such business is not "regulated by State law," the FTC tested the boundaries of its jurisdiction by seeking cease-and-desist orders against some insurers for alleged misleading advertising. In 1958 the Supreme Court found that the states into which health insurance advertising was mailed and then distributed locally by agents had enacted legislation prohibiting unfair advertising (the state Unfair Trade Practices Act) and had implemented a system to enforce it. Such conduct was regulated by state law; FTC jurisdiction was barred.

Judicial blunting of its early intrusions in insurance regulation did not permanently dampen FTC enthusiasm to make its presence felt. Armed with broad authority to investigate, the FTC evinced an aggressive interest in a variety of insurance areas in the 1970s. However, by 1980 the FTC had accumulated enough political opposition that Congress prohibited FTC studies or investigations of the business of insurance unless specifically requested by a majority vote of either the House or Senate Commerce Committee. Although this action effectively ended most insurance-related FTC projects, Congress maintained the option of either lifting this ban in its entirety or directing a study of a particular area. Thus the FTC remains a potential major regulatory factor.

The FTC was not alone in asserting federal jurisdiction. In the late 1950s the SEC showed increasing interest in the variable annuity concept emphasizing investment results. In a series of cases over several years, the SEC successfully asserted substantial control over different investment-oriented insurance products. (SEC regulation is discussed more fully later in this chapter.)