Insurance is among the most highly-regulated industries in America.
Even though at times it may seem that insurance companies can do whatever they please, insurance is actually one of the most heavily-regulated industries in America. Each state is responsible for its own insurance laws, and the National Association of Insurance Commissioners (NAIC) exists to help promote standards of regulation between states. By understanding different types of regulation, you can better understand the insurance industry and how it relates to you.
Insurance Rates
Every state is responsible for creating and enforcing laws that regulate the ways insurance companies set and charge premiums. Though the specific laws are different in each state, the general principle is the same everywhere. The California Department of Insurance, for example, must enforce California Insurance Code Section 1861.05 (a), which states that premium rates must not be excessive, inadequate or unfairly discriminatory. The premiums, therefore, must be large enough to cover losses but small enough to be affordable to the consumer.
Policy Filing
Each state is also responsible for approving insurance companies' policies before they are made available to the public for sale. This is done to protect consumers from unfair policy language. In some circumstances, however, a state's regulations may harm the customer and sometimes exemptions are made to this type of regulation. In Louisiana, for example, large commercial businesses often need customized policies that may not have been previously filed with the state. Waiting for state approval may cause a financial loss to the business. Accordingly, Louisiana insurance code Title 37, Part XIII, Chapter 90, Regulation 72 allows businesses of a certain size (criteria including over $200,000 annual premium) to accept insurance policies not previously approved by the state.
Health Insurance
States are responsible for setting the acceptable terms of health insurance policies. Some commonly- regulated areas of these contracts include pre-existing condition exclusions, ability to renew a policy after expiration and coverage for dependents. According to HealthInsuranceInDepth.com, New York has more health insurance regulations than most states, including mandatory renewals of insurance contracts upon request, 12-month limitations on pre-existing condition exclusions and 30 days of automatic coverage for newborns and newly-adopted children.
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