In Preparing For The State Senate Hearing About Insurance Regulations

In preparing for the state Senate hearing about insurance regulations there are questions that would be asked and the following answers to the questions that would be need to be addressed.
Question 1: What is the purpose of insurance regulation?
Answer: The fundamental reason for regulation of insurance is to protect the American consumers (NAIC, 2011). Insurance is more regulated that other types of business due to the complexity of the contracts, the lack of the information for consumers to shop for prices and adequacy of coverage, and insurance contracts are generally contracts of adhesion. The consumers want two things from the insurance regulators, solvent insurers who are financially able to stand behind their promises, and to treat

The state regulatory has the right to examine the annual and quarterly financial records to double check to make sure the insurer is financial stable. If the regulatory department finds that insurer to be financially impaired the department takes over the insurer and uses the financial guaranty funds to cover most of the consumer’s losses. The department works with the insurer financially troubled companies that are in a critical financial crisis. If the company is unable to fix the finances and has to be liquidated the department will step in and take over the

The state regulators are more aware of the consumer’s rights and protection than the federal regulators are. The most important responsibility is to protect the consumers. The federal regulators do not have the time to regulate every state for the changing needs or expansion on the insurance products that the insurer continues to develop for the consumers. The state regulators have done a better job on the insurance regulations and financials of the insurers than the federal government would be able to do. In as many years as the insurers have been around you have not heard of an insurer having to be bailed out cause of mismanagement of