1.1 Trade and Regulatory Associations Flashcards
What is The National Association of Insurance Commissioners (NAIC)?
It consists of all state and territorial insurance commissioners or regulators. It provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators. It also promotes uniformity among states. Members may accept or reject recommendations. The NAIC has no legal authority to enact or enforce insurance laws.
What is the Federal Insurance Office (FIO)
It was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act. This office monitors the insurance industry and identifies issues and gaps in the state regulation of insurers. It also monitors access to affordable insurance by traditionally underserved communities and consumers, minorities, and low- and moderate-income persons. The FIO is not a regulator or supervisor. Insurance is primarily regulated by the individual states. Insurance producer and company trade associations also exist to provide education, support, networking and lobbying for insurance companies and producers.
Insurance Regulation at the State Level
The insurance industry is regulated primarily at the state level. The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public. The judicial branch is responsible for interpreting and determining the constitutionality of the statutes. The role of a state’s executive branch is to enforce the existing statutes that have been put in place. The Commissioner, Director, or Superintendent of Insurance is typically appointed (or in some jurisdictions elected) by the Governor, and the Commissioner has the power to issue rules and regulations to help enforce these statutes.
Insurance Regulation at the Federal Level
In the aftermath of the Supreme Court decision in U.S. v. South-Eastern Underwriters (1944), the McCarran-Ferguson Act of 1945 established that the federal government will not regulate the business of insurance in areas which the states have historically had the authority to do so (such as producer and company licensing) unless the states fail to cooperate. Congress created federal agencies to provide regulatory oversight impacting insurance practices.
Private vs. Government Insurers
Most insurance is written through private insurers. However, there are instances where government-based insurers step in to offer an insurance alternative when private insurers are unable to provide protection. This is usually related to the catastrophic nature of the risk, capacity to handle the risk, and lack of desire to engage in a line of insurance where experience to evaluate necessary premium intake to offset potential loss is lacking.
