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
Ocean marine insurance covering one trip. Ocean marine insurance is written either for a specific time period or per trip. A voyage policy is usually written for cargo, whereas a time ...
Provision found in property and liability insurance policies that mandates that the insured notify the insurance company as soon as possible following the occurrence of a covered loss under ...
Percentage of first year's premium paid to compensate an insurance agent. This is known as the "First Years" to show how much new business the agent is generating, compared with renewal ...
Coverage in a separate policy or as an endorsement to the commercial general liability (CGL) form, for liability exposures for an employee who drives a leased car or his or her own ...
Investments restricted to short-term Treasury bills (T-bills) and repurchase agreements secured by Treasury bills. These T-bills are secured by the full faith and credit of the Unites ...
Modified participating level coverage permanent life insurance policy under which the dividends are credited to the policy, thereby reducing the premiums below that usually charged for an ...
Supplementary life insurance reserve required by state regulators when the gross premium is lower than the valuation premium. Some life insurers are able to charge policyholders a premium ...
Coverage for extra expenses associated with the reconstruction of a damaged or destroyed building where zoning requirements mandate more costly construction material. This endorsement is ...
Latin phrase for "The facts speak for themselves." This is a rule of evidence under which an individual is deemed, under certain specific circumstances, to be negligent by the mere ...
Have a question or comment?
We're here to help.