State Supervision And Regulation
Primary responsibility for overseeing the insurance industry that has rested with individual states since 1945, after Congress passed the MCCARRAN-FERGUSON ACT (PUBLIC LAW 15). In addition to supervision and regulation, states receive taxes and fees paid by the industry that amount to several billion dollars a year. State insurance laws are administered by state insurance departments that are responsible for making certain that (1) rates are adequate, not unfairly discriminatory, and not unreasonably high, and (2) insurance companies in the state are financially sound and able to pay future claims. To this end, states set requirements for company reserves, require annual financial statements, and examine company books. Each state has an insurance commissioner or superintendent who is either elected or appointed by the governor, with responsibility for investigating company practices, approving rates and policy forms, and ordering liquidation of insolvent insurers. The NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC) has drafted model legislation and worked for policy uniformity, but regulations vary widely from state to state.
Whether insurers should be regulated by the states or the federal government remains at issue, but so far insurers and the NAIC lobbying have been effective in resisting federal regulation. Nevertheless, the federal government has a profound effect on the insurance industry through its taxes and a variety of regulations.
Popular Insurance Terms
One-year futures contract (standardized agreement between two parties to buy or sell a commodity or financial instrument on an organized futures exchange such as the CBOT within some future ...
In property insurance policies, provision that excludes the insurance company's liability for indemnification of the insured for the insured's expenses incurred in the demolition of ...
Workers' premiums in a contributory employee benefit plan. ...
Requirement upon termination of a pension plan; an employer must reimburse the pension benefit guaranty corporation (pbgc) for any loss that the PBGC incurs as the result of paying employee ...
Model state law of the NAIC that stipulates that the total sum of medium grade bonds (bonds carrying a rating of 3, assigned by the Securities Valuation Office of the NAIC) and lower grade ...
Optional provision in a disability income policy that allows the policyowner to increase the monthly income sum at an approximate rate of 6%. ...
When we are young, we usually don’t take our retirement seriously and don’t even know the definition of an Individual Retirement Account (IRA). We become more preoccupied with ...
Property loss in which the insured peril is the proximate cause (an unbroken chain of events) of the damage or destruction. Most basic property insurance policies (such as the standard fire ...
Reinsurance term under which the reinsurer exercises its faculty or prerogative to insure a risk or reject a risk from a ceding company. ...
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