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
Arrangement of financial affairs such that a family member who is in a lower income tax bracket receives income that another family member would otherwise have received (thereby reducing ...
Legal power of the commissioner of Internal Revenue to approve any classification of employees that does not discriminate in favor of a prohibited group. Such approval is necessary before a ...
Type of business interruption insurance policy that provides a specific daily dollar amount benefit to the business owner for each day the business is unable to resume normal business ...
Broad type of marine legal liability coverage, hull marine insurance is limited to an insured ship. With the addition of a running down clause, a policy can be extended to cover liability ...
Formal, written, legal statement listing the provisions of an EMPLOYEE BENEFIT INSURANCE PLAN. ...
Modified guaranteed investment contract (GIC) in which the underlying assets of the synthetic contract are owned by the plan itself rather than the insurance company as is the case with the ...
Organization that underwrites insurance policies. There are two principal types of insurance companies: mutual and stock. A mutual company is owned by its policy owners, who elect a board ...
Separate trust established by a charitable entity whose purpose is to receive contributions from numerous donors. All the donors' contributions are commingled. Each donor can retain a ...
In property insurance, amount that an insured does not have to pay when a loss exceeds a predetermined sum; here the insurance company pays more than 100% of the loss, so that the ...
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