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
Form of insurance that insurance companies buy for their own protection, "a sharing of insurance." An insurer (the reinsured) reduces its possible maximum loss on either an individual risk ...
Table charting relative costs of a group of cash value life insurance policies derived by using the net cost method of comparing costs (traditional net cost method of comparing costs; net ...
Rule concerning stock sold and then repurchased or a similar security repurchased (warrants or options) within 30 full days before or after the day of the sale. Losses established from such ...
Employee's right to transfer pension benefit credits from a former employer to a current employer. ...
Same as term Corridor Deductible: type of major medical deductible amount that acts as a corridor between benefits under a basic health insurance plan and benefits under a major medical ...
Group that advises on employee benefit plans as to amount of benefits to be paid, how benefits are to be financed, and how employees are to qualify for benefits (vesting requirements). An ...
Analytical procedure to predict the failure rate of a system still in the design stage. ...
Provision commonly found in fire insurance contracts. If the insured knows that a hazard is increased, most property contracts permit the insurance company to suspend or terminate coverage. ...
Total limit on the amount of coverage an insurer will underwrite on an individual risk. The amount underwritten includes the amount to be ceded through a reinsurance agreement. ...
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