Insurance law


Insurance law

Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims. It can be broadly broken into two categories - regulation of the business of insurance and regulation of claim handling.

Regulation of insurance companies

In the United States

As a preliminary matter, insurance companies are generally required to follow all of the same laws and regulations as any other type of business. This would include zoning and land use, wage and hour laws, tax laws, and securities regulations. There are also other regulations that insurers must also follow.

Regulation of the business of insurance

Insurance regulation that governs the business of insurance is typically aimed at assuring the solvency of insurance companies. Thus, this type of regulation governs capitalization, reserve policies, rates and various other "back office" processes.

In the United States each state typically has a statute creating an adminsitrative agency. These state agencies are typically called the Department of Insurance, or some similar name, and the head official is the Insurance Commissioner, or a similar titled officer. The agency then creates a group of administrative regulations to govern insurance companies which are domociled in, or do business in the state.

The origins of insurance policies in general differs through various countries. Limited policies (particularly against damage to homes) can be traced to the 17th and 18th centuries, though establishment of newer policies (such as health insurance and car insurance) did not come until the 20th century.

In the United States regulation of insurance companies is almost exlusively conducted by the several states and their insurance departments. Various states have different names for their regulatory agencies and regulators. In many states the department is called the Department of Insurance, and the regulator is called the Insurance Commissioner - although there are numerous variations. The federal government has explicitly exempted insurance from federal regulation in most cases.

However, regulation of the insurance industry began in the 1940s in the United States, through several supreme court rulings. The first ruling on insurance had taken place in 1868 (in the Paul v. Virginia ruling [ [http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=CASE&court=US&vol=75&page=168 PAUL v. STATE OF VIRGINIA, 75 U.S. 168 (1868)] ] ), with the supreme court ruling that insurance policy contracts were not in themselves commercial contracts. This stance did not change until 1944 (in the "United States v. South-Eastern Underwriters Association" ruling [ [http://www.vlex.us/caselaw/U-S-Supreme-Court/United-States-v-South-Eastern-Underwriters-Assn-322-U-S-533-1944/2100-20015046%2C01.html United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944)] ] ), when the Supreme court upheld a ruling stating that policies were commercial, and thus were regulatable as other similar contracts were.

Nowadays, many countries - and states in the United States - regulate insurance companies through laws, guidelines and independent commissions and regulatory bodies. These laws and statutes ensure that the policy holder is protected against bad faith claims on the insurer's part, that premiums are not unduly high (or fixed), and that contracts and policies issued meet a minimum standard.

A bad faith action may constitute several possibilities; the insurer denies a claim which is seemingly valid in the contract or policy, the insurer refuses to pay out for an unreasonable amount of time, the insurer lays the burden of proof on the insured - often in the case where the claim is unprovable. Other issues of insurance law may arise when price fixing occurs between insurers, creating an unfair competitive environment for consumers. A notable example of this is where Zurich Financial Services [ [http://www.insurancejournal.com/news/national/2006/03/19/66587.htm Zurich, 9 States Settle Bid-Rigging Case for $171 Million] ] - along with several other insurers - inflated policy prices in an anti-competitive fashion. If an insurer is found to be guilty of fraud or deception, they can be fined either by regulatory bodies, or in a lawsuit by the insured or surrounding party. In more severe cases, or if the party has had a series of complaints or rulings, the insurers license may be revoked or suspended.

In the case that an insurer declares bankruptcy, many countries operate independent services and regulation to ensure as little financial hardship is incurred as possible (National Association of Insurance Commissioners operates such a service in the United States [ [http://www.ncigf.org The National Conference of Insurance Guaranty Funds] ] ).

See also

* Financial Services Authority - independent regulator of financial services (including insurance)
* Insurance
* National Association of Insurance Commissioners
* Australian insurance law
* [http://www.magwoodlaw.com Insurance Law Basics & News]

References


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