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
Provision in many property insurance policies that excludes coverage for floods and backup from sewers or drains and underground water. Because floods and hurricanes are generally confined ...
Documents completed by the agent to effect authorization to act on behalf of the company. ...
Physical, moral, or financial circumstance of a life insurance applicant that sets him or her apart from a physically, morally, and financially sound standard applicant. The underwriting ...
Entitlement of a pension plan participant (employee) to receive full benefits at normal retirement age, or a reduced benefit upon early retirement, whether or not the participant still ...
Transaction in which the ceding company pays a premium and is guaranteed certain future payments to fund future losses. If losses are less than was expected, the ceding company receives a ...
Subsidence is a term used in geology, engineering and surveying to denote the motion of a surface (usually, the earth\'s surface) downwards relative to a datum such as sea-level. In ...
Combination of several insurance companies to provide the capacity to underwrite a particular type or size of exposure. For example, liability coverage for a drug company's vaccine has been ...
Mathematician in the insurance field. Actuaries conduct various statistical studies; construct morbidity and mortality tables; calculate premiums, reserves, and dividends for participating ...
Transfer of rights under an insurance policy to another person or business. For example, to secure a debt, it is not uncommon for the policyowner to transfer to the creditor his rights to ...
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