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
part of the Model Uniform Life and Health Insurance Policy Provisions Law giving an insurer a time limit on contesting coverage for preexisting conditions or misrepresentation. This law, ...
Picture of future dividends that the insurance company expects to be allocated to a specific block of policies. The accuracy of this picture depends on the actual future mortality, ...
Same as term Coinsurance: ...
Coverage for an insured firm if its business debtors fail to pay their obligations. The insured firm can be a manufacturer or a service organization but it cannot sell its products or ...
Mathematical premise stating that the greater the number of exposures, (1) the more accurate the prediction; (2) the less the deviation of the actual losses from the expected losses (X - x ...
Individual action or failure to act as a reasonably prudent person would under similar circumstances, resulting in harm to another. Also called negligence. A reasonably prudent person is ...
A ceding company's premium to which the reinsurance premium factor is used to produce the reinsurance premium. ...
Difference between the actual mortality experience and the expected mortality experience. In statistical terms, this is known as the deviation of the actual (X) from the expected (X). The ...
Time interval between the date benefits end under Social Security and the date these benefits resume. For example, survivor benefits are paid only as long as the parent (if less than age ...
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