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
Individual who represents a ceding insurance company in placing its business with a re insurer. ...
Factors on the application that must be evaluated in order to complete the underwriting process: age; sex; physical condition; personal health history; family health history; financial ...
Approach to derive trend lines that can be applied to rating insured losses. Other methods require substantial preliminary operations to solve systems of equations of several unknowns. The ...
Insurance purchased from an insurance company that has been licensed in the state in which the policy is purchased. This insurance is purchased through an agent or broker who are licensed ...
Policy provision that provides coverage for continuing payroll expense of all employees of an insured business (except for officers and executives) for the first specified number of days of ...
Ruling that is the most significant source for the valuation of closely held corporation capital stock critical to the close corporation plan. This ruling defines the fair market value as ...
Type of mortality table that is based on combined statistics from both the ultimate mortality table and the aggregate mortality table. It shows total statistics for the probability of ...
Circumstance under which there is a significant deviation of the actual aggregate losses from the expected aggregate losses. For example, a hurricane is a hazard that is catastrophic in ...
Standards used to determine claims payments in cases of overlapping property/liability insurance coverage. At one time, each type of insurance had its own rules to govern claims where more ...
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