Insurance laws and regulations in USA

National Association of Insurance Commissioners

Established in 1871 NAIC (National Association of Insurance Commissioners) comprising of all the insurance commissioners from all the US states is responsible for coming up with model insurance laws and regulations which are then modified and adopted by the different states based on their needs. NAIC doesn’t act as an insurance regulator but the main functions of this non government body is to

• Boost and promote the beneficial insurance laws and regulations that are supported by state based insurance regulators
• Create Statuary accounting principles
• Helps in maintaining uniformity in the laws and regulations across different US states

There are two different categories of insurance laws and regulations in USA, the first to keep a check on the proper functioning of all the insurance business houses and second category of law keep a track of all the claim handling cases.

Regulating Insurance Business

Till 1944 insurance businesses were not a part of the commerce community and were regulated by federal bodies. But with the passing of McCarren-Ferguson Act more regulatory powers were provided to the state government barring certain types of insurance like federal taxes. Insurance Regulation of businesses involves tracking of solvency of all the insurance providers that consist of governing the capitalization, reserving the policies, rate and other office work. Every state has an insurance department headed by the Insurance commissioner who helps the state government in carrying out the regulations of all the insurance companies that are authorized to do business in that particular state.

Regulating Claim Handling

By regulating claim handling US government is protecting policyholders against bad faith cases that are slapped by the insurers, also a strict check is kept on the premium amount and contract conditions and policies should be drafted keeping in mind certain guidelines.

Strict insurance laws and regulations in USA have been passed to safegurad the interests of all the policy owners when there is a sudden rise in the number of bad faith cases. There was a huge hue and cry by the policy owners when they were unable to receive the insurance amount even after long periods or in some cases, when the insurers denied the claims stating to be invalid. Also, the NAIC ensures that no policy holder suffer financial hardships, in case an insurance provider files banckrupty.

A new rule on disclosure introduced recently by the New York state has received much applause from both the insurers and the policy holders. The government has instructed the companies to provide detailed documents to customers stating clearly all the compensation criteria and what incentives the insurance agents will receive based on the compensation amount. Insurance laws and regulations in USA have surely made life easier for both the parties.