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
Provision used to avoid duplication of coverage in other policies; to eliminate coverage for property under the care, custody, and control of an insured business; as well as to avoid ...
Investment risk associated with the possibility that there is a rise in the interest rates after a fixed income security has been purchased resulting in a decline in that security's price. ...
same as term Lost Policy Receipt: life insurance company form to be signed by a policyholder who wishes to surrender a policy that has been lost. The signed receipt then becomes evidence ...
Charging the insured an amount that is above the actual premium required for placing and maintaining the policy in force. ...
Same as term Excess of Loss Reinsurance: method whereby an insurer pays the amount of each claim for each risk up to a limit determined in advance and the reinsurer pays the amount of the ...
Type of accounting method, in life insurance, designed to match revenues and expenses of an insurer according to principles designed by the Financial Accounting Standards Board and the ...
Agreement by the insured that, simply because the insurer investigates and determines a value for the claim, the insurer does not admit liability for the claim. ...
Branch of knowledge dealing with the mathematics of insurance, including probabilities. It is used in ensuring that risks are carefully evaluated, that adequate premiums are charged for ...
Interest earned on dividends from a participating life insurance policy left on deposit with the insurance company and subject to taxation. ...
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