Insurance in the United States
[2] For example, a property insurance company may agree to bear the risk that a particular piece of property (e.g., a car or a house) may suffer a specific type or types of damage or loss during a certain period of time in exchange for a fee from the policyholder who would otherwise be responsible for that damage or loss.
[3] Insurance provides indemnification against loss or liability from specified events and circumstances that may occur or be discovered during a specified period.
[7] Massachusetts enacted the first state law requiring insurance companies to maintain adequate reserves in 1837.
[15] The McCarran-Ferguson Act specifically provides that the regulation of the business of insurance by the state governments is in the public interest.
[17] In response, the National Association of Insurance Commissioners (NAIC) adopted several model reforms for state insurance regulation, including risk-based capital requirements, financial regulation accreditation standards and an initiative to codify accounting principles.
The NAIC also acts at the national level to advance laws and policies supported by state insurance regulators.
[17] The idea of an optional federal charter was first raised after a spate of solvency and capacity issues plagued property and casualty insurers in the 1970s.
This OFC concept was to establish an elective federal regulatory scheme that insurers could opt into from the traditional state system, somewhat analogous to the dual-charter regulation of banks.
[21] In 1979 and the early 1980s the Federal Trade Commission attempted to regulate the insurance industry, but the Senate Commerce Committee voted unanimously to prohibit the FTC's efforts.
President Jimmy Carter attempted to create an "Office of Insurance Analysis" in the Treasury Department, but the idea was abandoned under industry pressure.
[17] In 2010, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act which is touted by some as the most sweeping financial regulation overhaul since the Great Depression.
The FIO is authorized to monitor all of the insurance industry and identify any gaps in the state-based regulatory system.
In turn, brokers presented by clients with those risks can immediately "export" them to the out-of-state surplus market and apply directly to surplus line insurers without having to first document multiple attempts to present the risk to admitted insurers.
For example, the California export list includes ambulance services, amusement parks, blasting, fireworks displays, moving a building, demolition, hay in the open, hot air balloons, medical billing, product recalls, sawmills, scaffolding, security guards, and tattoo shops, as well as particular types of insurance like employment practices liability and kidnap and ransom.
[25] One long-running issue with the surplus lines concept is that it makes less sense when applied to sophisticated insureds with many risks spread across multiple states.
There are large variations among insurance groups relating to division of business functions between the parent corporation and its subsidiaries.
However, as far as most layperson customers are subjectively aware (unless they read their insurance policies carefully), they are simply dealing with GEICO.
[27] The GAO issued a study in 2013 that found large insurance groups had weathered the 2008 financial crisis well, but recommended additional regulatory reform and scrutiny of risks associated with non-insurer entities.
[30] By way of contrast, when small insurers fail, they tend to do so in a rather wild and spectacular fashion, as was often the case during the economic cycles of the 1970s and 1980s.
