Federal, State, and Other Influences Flashcards
activities identified by Supreme Court cases as “business of insurance”, most current definition (3)
*U.S. v. SEUA (1944): insurers’ fixing of rates
*Robertson v. California (1946): licensing of insurers and agents
*FTC v. National Casualty (1958): selling and advertising insurance policies
*SEC v. Variable Annuity Life (1959): risk underwriting
*SEC v. National Securities (1969): relationship between insurer and insured; types of policies issued; reliability, interpretation, and enforcement of policies; NOT relationship between company and stockholder
Group Life and Health v. Royal Drug (1979):
* spreading and underwriting of risk
* direct contractual agreement between insurer and insured
* activities unique to insurance industry
federal regulation that impacts insurance (5)
- regulation of securities
- corporate tax rules
- standards for pensions and benefit plans
- safety and health standards (OSHA)
- anti-discrimination regulations
other influences on insurance regulation (4)
- court decisions
- insurance industry trade associations
- insurance advisory organizations
- consumer groups
sources of state insurance regulation (3)
- legislative branch - statutory law
- executive branch - DOI adopts regulations to comply with state code: administrative law
- judicial branch - case law
features of a typical state insurance regulatory system (4)
- licensing requirements for insurers and producers
- reporting and filing requirements
- periodic examinations
- power to impose sanctions
role of state legislatures in insurance regulation (4)
- legislatures control DOI budgets and pass laws DOIs must enforce
- DOIs submit annual reports to legislatures summarizing DOI activities and status of industry
- noninsurance laws: contract, banking, fraud, investments, etc.
- National Conference of Insurance Legislators (NCOIL) educates legislators, facilitates communication
role of NAIC
coordinates regulation of insurance operations in multiple jurisdictions
NAIC mission (4)
- protect public interest
- promote competitive markets
- facilitate fair and equitable treatment of consumers
- promote reliability, solvency, and financial solidity of insurance institutions
NAIC assistance to state regulators (5)
- maintaining databases to track insurer financial solvency
- valuing insurers’ securities
- tracking insurance issues at the federal level and expressing state concerns to the federal government
- developing and interpreting statistical reports
- giving expert advice about financial regulation and market conduct regulation
benefits of NAIC model laws (2)
- streamline legislative development process by doing research and draft work
- guide states to adopt similar laws and regulations
reasons state legislators may not adopt model laws (3)
- model laws are inappropriate or unnecessary if other state laws address the issue
- modify model laws to meet their state’s needs
- lower priority than other matters
NAIC financial accreditation
sets minimum standards for DOI solvency regulation in three areas:
- state laws and regulations
- regulatory methods
- DOI practices
critiques of NAIC financial accreditation (3)
- some standards (e.g. budgets) are outside DOI control
- may infringe on legislative authority
- calls for a system of federal oversight
NAIC financial accreditation process
1) commissioner requests review
2) review team with no conflicts of interest selected
3) review activities:
* interviewing department personnel
* reviewing laws and regulations
* reviewing prior examination reports
* inspecting regulatory files for selected companies
* reviewing organization and personnel policies
4) closing conference to discuss findings
