Regulation of Insurance Companies

Insurance law is the legal term used to refer to practices of law involving insurance such as insurance policies and claims. It has two broad classifications which are (1) management of the insurance business and (2) management of claim handling.

In general, insurance companies are required to abide by all the laws and bylaws just like any other kind of business. Laws governing zoning and land use, tax, wage and hour and security are among others. There are still other regulations that insurers are required to follow aside from the ones mentioned.

Government Regulatory Bodies

The purpose of imposing rules governing the insurance business is to make sure that the finances of these insurance companies are in good condition. Accordingly, this kind of regulation oversees reserve policies, capitalization, rates and other internal operations that are not accessible or visible to the general public.
In the United States, every state has a statute that entails the formation of an administrative agency.

Typically these federal agencies are referred to as the Department of Finance or a name close to that and the head administrator is referred to as Insurance Commissioner or a similar title. The agency then establishes a set of regulations to oversee insurance companies domiciled in or operating business in the state.

In the United States a number of states and their insurance departments almost entirely conduct the regulation of insurance companies. These states assign varying names to their agencies and regulators. The department is generally referred to as the Department of Insurance and the regulator as Insurance Commissioner, although this may also vary in other states. Insurance is not embraced in the federal regulation in most instances.

Possible Hazards for a Policy Holder

At the present time, the regulation of insurance companies is reinforced by laws, rules and independent commission and regulatory units. Laws and statutes are made to protect the policy holder from bad faith claims from the insurer.

Bad faith may be manifested in many actions, for instance, the insurer disapproves a claim which apparently meets the qualifying criteria specified in the contract or policy, the insurer does not agree to pay for an irrational period of time or the insurer obligates the insured to present proof commonly in cases that are impossible to prove.

Price fixing between insurers initiates other issues of insurance law. This creates an inequitable competitive milieu for consumers. There are different services and regulations in many countries that make sure that there will be minimal financial burden if ever an insurer becomes bankrupt.

This article should not be treated as a legal advice.

Visit the website of Attorneys Kelly and Uustal for more information about insurance policy holders protection. Serving clients across the state of Florida.