• International Insurance Blog

  • Monday, December 18, 2017

The states regulate insurance in the United States. The history of insurance regulation, however, has been marked by federal-state tensions and accommodations, and, after more than a century of state dominance, by periodic proposals for federal intervention.

The United States Supreme Court has long recognized the need for insurance to be regulated as it is business coupled with a public interest. Consumers invest substantial sums in insurance coverage in advance, but the value of the insurance lies in the future performance of the various contingent obligations. Because the interests protected are so important including an individual’s future ability to provide for dependents in case of death or injury, to retire, to obtain necessary medical treatment, to replace damaged or destroyed property—regulation of the industry furthers public welfare.

The National Association of Insurance Commissioners (NAIC), a voluntary association of state insurance commissioners, has played an essential role in the process of centralization, expanding upon its initial advisory and model law drafting functions until it resembled a federal agency in many ways. The NAIC’s central role in the United States system of insurance regulation demonstrates that, for the most part, the states’ regulatory apparatus has been unable to function appropriately as individual units because of the complex national and international nature of the insurance industry.

However, as a private, nongovernmental organization with no power of its own, the NAIC is inadequate to perform the more complex tasks it has taken on and which financial services integration will demand of it. The stability of the insurance industry, and the protection of the consumers who rely on it, are at stake. Regulatory reform is essential.

Comment by Blog Contributor on 2009 08 25

Insurance attorney Peter Lencsis provides a unique, objective description of the insurance regulatory system as it exists today in the United States. Concise but comprehensive, it provides an easily grasped, immediately useful explanation of how the regulatory system works. Because of the federal McCarran-Ferguson Act, most insurance regulation is left to the individual states, and is thus non-uniform. But there is still a common pattern to state regulation, explains Lencsis, due in large part to the activities of the National Association of Insurance Commissioners and its own uniform standards. Lencsis covers the formation and licensing of insurance companies and the regulation of their underwriting and investment activities, as well as the insurance insolvency laws and guaranty funds, assigned risk plans, reinsurance, holding companies, and the regulation of agents and brokers. An important resource for insurance industry professionals, and others in regulatory agencies of the public sector.

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