History of Regulation Flashcards
1868-Paul v. Virginia
This case, which the U.S. Supreme Court decided, involved one state’s attempt to regulate an insurance company domiciled in another sate. The Supreme Court sided against the insurance company, ruling that the sale and issuance of insurance is not interstate commerce, thus upholding states’ right to regulate insurance.
1944-United States v. Southeastern Underwritters Association (SEUA)
The decision of Paul v. Virginia was held for 75 years before the Supreme Court again addressed the issue of state versus federal regulation of the insurance industry. In the SEUA case, the Supreme Court ruled that the insurance industry is a form of interstate commerce. As such, the insurance industry should be regulated by the federal government and subject to a series of federal laws, many of which conflicted with existing state laws. This decision did not affect state’s power to regulate insurance, but it did nullify state laws that conflicted with federal legislation. The result of the SEUA case was to shift the balance of regulatory control to the federal government
1945-The McCarran-Ferguson Act
The turmoil created by the SEUA case prompted Congress to enact Public Law 15, the McCarran-Ferguson Act. This law made it clear that the states continued regulation of insurance was in the public’s best interest. However, it also made possible the application of federal antitrust laws to the extent that (the insurance business) is not regulated by state law. This act led each state to revise its insurance laws to conform to the federal laws. Today, the insurance industry is considered to be state regulated. Any person who violates the McCarran-Ferguson act faces a fine of $10,000 or up to one year in jail.
1958-Intervention by the FTC.
In the mid-1950s, the Federal Trade Commission (FTC) sought to control the health insurance industry’s advertising and sales literature. In 1958 the Supreme Court held that the McCarran-Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further federal control, but none have been successful.
1959-Intervention by the SEC
In this instance, the issue was variable annuities: Is a variable annuity an insurance product that should be regulated by the states or a securities product that should be regulated federally by the Securities and Exchange Commission? (SEC)? The Supreme Court ruled that the federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulation. The SEC also regulates variable life insurance.
1970-Fair Credit Reporting Act
In an attempt to protect an individual’s right to privacy, the federal government passed the Fair Credit Reporting Act, which is the authority that requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application. If any consumer report is used to deny coverage or charge higher rates, the insurer must furnish the applicant the name of the reporting agency conducting the investigation.
Any insurance company that fails to comply with this act is liable to the consumer for actual and punitive damages. The maximum penalty for obtaining Consumer Information Reports under false pretenses is $5,000- and 1-year imprisonment.
1994-United States Code (USC) Sections 1033 & 1034
According to 18 USC section 1033 &1034, it is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a “Letter of Written Consent to Engage in the Business of Insurance” from the regulating insurance department of the individual’s state of residence.
1999-Financial Services Modernization Act || (Gramm-Leach-Bliley Act, or GLBA)
This Act allowed commercial banks, investment banks, retail brokerages, and insurance companies to engage in each other’s lines of business.
2003-Do Not Call Implementation Act
The Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls. Calls made on behalf of charities, political organizations, and surveys are exempt. Insurance calls are not exempt from the do not call registry.
2001-Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act || The Patriot Act, which amends the Bank Secrecy Act (BSA)
Adopted in response to the September 11, 2001, terrorist attacks. The Patriot Act is intended to strengthen U.S. measures to prevent, detect, and deter terrorists and their funding. The act also aims to prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities.
2003-CAN-SPAM Act
This Act creates rules for commercial emails and messages. Specifically, the regulation outlines the right for a consumer to request a business to stop sending emails, the requirements for businesses to honor such requests, and the penalties incurred for those who violate the Act. The Act covers all electronic mail messages with the primary purpose of advertisement or promotion of a product, service, or commercial websites. The Act does not apply to transactional and relationship messages.
According to the Federal Trade Commission, the main requirements of the CAN-SPAM act include:
Don’t use false or misleading header information (i.e., “From,” “To,” “Reply-To,” etc.)
Don’t use deceptive subject lines (i.e., the subject line must accurately reflect the content of the message.
Identify the message as an advertisement.
Include the companies valid physical postal address in every email
Tell recipients how to opt out of receiving future emails (i.e., a return email address or another easy Internet-based way to allow people to communicate their choice to opt out).
Honor opt-out requests promptly (i.e., within 10 business days.
Don’t charge a fee, require the recipient to give personally identifying information beyond an email address, or make overcomplicate the process.
2010-Patient Protection and Affordable Care Act (PPACA)
