Important Insurance Regulations

Here are some of the regulations and definitions used by each state to uphold the law.

Insurance Regulatory Law (“Market Regulations”) – These regulations are mainly enforced within the regulations and directives put forth by federal law in conjunction with each state’s insurance policies. These regulations have been created to prevent unfair or deceptive procedures when selling policies, settling claims along with any other procedures that are strictly prohibited.

Solvency Regulations – Regulations that seek to ensure that all insurance companies are able to pay all insurers when in need. This is accomplished by making sure that the insurance company is matching the “Risk-Based Capital” for all currently held policies. Periodic research into each company’s finances help the NAIC to accurately gauge solvency liquidity and appropriately take action.

Solvency Modernization Initiative (SMI) – Assess the risks of insurance companies by measuring them within many different regulatory groups and ideologies:

  • Enterprise Risk Management   An in-depth look at how the inner workings of an insurance company can sustain or obliterate the company’s existence. This account of finances is done with various methods to benefit both consumer and economy. With the financial collapse in 2008, insurance companies understand the importance towards reviewing their risks at least annually.
  • NAIC Model Holding Company Act Regulates some interactions between the insurance company and the group. As an example, some policies might need further approval by the state commissioner.
  • Own Risk and Solvency Assesment (ORSA) – Requires insurance companies to assess their own risks annually. Only single-entity insurers that write more than $500 million of premiums annually are required to uphold this initiative.  This will be mandatory for all states starting at the end of 2017.

Policy Form Regulation – All insurance companies are required to have an approval of each policy and endorsement by their state insurance commissioner before a policy approval. The NAIC plays the largest role in approving upcoming policy trends and also dictate new policy with regards to protecting the interests of the public while promoting a healthy market.

Prior Approval Laws – Insurers must file statistical data and projected expenses to receive any rate change approval. (Typically all insurance rates are regulated by competition.)

Enterprise Risk Management (ERM) – Risk management has been an important integration within the insurance business practices since the 2008 economic collapse. Underwriting, asset and operational risks are among the most important to manage.

Asset Liability Management (ALM) – Allocation of assets, equity, interest rate and credit risk management.