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
Financial incentives credited to the policy to encourage the policyowner to keep the policy in force. The incentives may be utilized by: (1) applying them to the policy cash value after a ...
Accidental death benefit option that can be added to a disability income (DI) policy under which a lump sum is payable at the loss of life, dismemberment, or loss of sight. ...
Reserves required by state regulators. Because regulators must assure that an insurance company remains solvent and that it can pay future claims, they set conservative standards for ...
Terms specifying obligations of an insured to keep a policy in force. For example, an insured must pay the premiums due; in life insurance, if death occurs, the beneficiary or the insured's ...
Same as term Fortuitous Loss: loss occurring by accident or chance, not by anyone's intention. Insurance policies provide coverage against losses that occur only on a chance basis, where ...
Process of the continual reinsurance of a ceding company's portfolio of insurance policies. All premiums that have been ceded become earned premiums. ...
Statistical function that displays the probability of determining a stated number of successes in a series of trials in which the probability of success is the same in each trial. In ...
Marketing of insurance through independent agents; also called independent agency system. Independent agents usually represent several insurance companies and try to insure the risk ...
Provision of a reinsurance contract that states that the reinsurance company remains liable for its predetermined share of a claim submitted by an insured, even though the primary insurance ...
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