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
Medical malpractice that is the legal responsibility of a person or organization not in the medical profession or business. It is usually covered under a professional liability insurance ...
Sum of money paid on the principal amount of money invested or loaned. ...
Type of coverage of property owned by one person at several locations, including merchandise, materials, fixtures, furniture, specified machinery, betterments, and improvements made by ...
Loss of income resulting from the damage or destruction of a person's property or a business's property. For example, if a store is damaged by fire and is unable to sell its inventory to ...
Time frame during which an annuitant makes premium payments to an insurance company. The obligations of the company to the annuitant during this period depend on whether a pure annuity or ...
Rejection by an insurance company of an application for a policy. ...
Legislation that provided temporary rules for implementing the employee retirement income security act of 1974 (erisa). ...
Coverage for small groups that cannot meet the underwriting standards of true group insurance. Even though the franchise insurance covers an entire group, individual policies are written on ...
HEALTH MAINTENANCE ORGANIZATION that restricts to a relatively small amount the number of medical providers from which an HMO member may seek services. Usually, HMO members may select the ...
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