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
Coverage in property insurance for an employee's lost income if a peril such as fire damages or destroys the place of employment, causing the worker to become unemployed. For example, a ...
Table used by the Internal Revenue Service (IRS) in evaluating split dollar life insurance plans as to the extent of the economic benefit that is considered taxable ordinary income to the ...
Complete coverage for hospital and physician charges subject to deductibles and coinsurance. This coverage combines basic medical expense policy and major medical policy. ...
Risk management tool to determine risk exposure and to help spread the risk. A risk manager considers a business firm's individual exposures separately. As the number of exposures ...
System for calculating the relationship between a pension plan's present cost and its present future benefits. This relationship shows the extent to which a pension plan's benefits are ...
Method of accident prevention whose objective is to detect system-component deficiencies that have the potential for causing accidents. ...
Rule that stipulates how to calculate the actual cash value of property that has been damaged, destroyed, or stolen. The thesis of this rule is that whatever evidence that can be produced ...
in health insurance, reimbursement for an insured's medically related expenses, including room and board, surgery, medicines,anesthetics, ambulance service to and from a hospital, ...
Policy purchased by an insured from an insurer in another state. This insurer is not licensed in the state where the insured's risk is located. ...
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