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
Rule for accounting for contingencies that has application for the accounting of liabilities under the comprehensive environmental response, compensation, and liability act of 1980 ...
Retirement arrangement in which contributions are divided between allocated (insured) and unallocated funding instruments (an uninsured plan). It seeks to combine the advantages of ...
Combination of an interest rate cap and an interest rate floor, creating a band within which interest rates can range. For example, if an interest rate band is between 6% and 10%, the ...
Charitable planning strategy in which a donor sells an asset to the charity for an amount less than its fair market value. Internal Revenue Service regulations require that the tax basis ...
property insurer that distributes its products through a direct selling system. Traditionally, insurers often were known as direct writers if they used either a direct selling system or an ...
Funding of an employee's benefits in a pension plan for his or her beginning past service of employment. This is a significant cost factor in pension planning and financing of future ...
Bulletin issued June, 1993, with disclosure requirements that strongly suggest that insurance companies establish reserves or add to current reserves for asbestos and environmental risks to ...
Agency formed as the result of bank failures in the 1930s to insure the deposits of customers of member banks. The FDIC, an agency of the federal government, is self-supporting in that it ...
Liability created when an individual who offers services to the general public claims expertise in a particular area greater than the ordinary layman. Today, suits are frequently brought ...
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