Law Blog 4 Fighting Abuse

Insurance law concerns itself with the laws surrounding two aspects of the insurance business— regulation of the business of insurance and the regulation of claim handling.

In the United States, all insurance companies, besides having to comply with all the laws concerning all types of businesses also have to conform to regulations set by the State on entities engaged in the business of insurance.

Business Insurance Regulations

Regulation of the business of insurance is usually done by various States through their respective regulatory agencies. These agencies are headed by an Insurance Commissioner and are in charge of coming up with the administrative guidelines insurance companies have to comply with and to implement and execute the State’s law on insurance. Federal law recognizes the authority of these regulatory agencies and has exempted them from federal regulation in most cases.

Insurance Regulation Objectives

The aim of regulation is to ensure that insurance companies are adequately capitalized and solvent and involves rules governing capitalization, reserve policies, rates and other “back office” processes.

The regulations these State agencies are charged with implementing help protect the policy holder (also known as the insured) against so-called bad faith claims on the insurer’s part. A bad faith action happens when the insurer denies a claim which appears valid on the face of the insurance contract; when the insurer refuses to pay the proceeds of the insurance policy on a valid claim for an unreasonable period of time; and when the insurer lays the burden of proof on the insured, a case which often happens when the insurer is unable to prove his claim.

These laws also see to it that premiums paid to insurance companies are not unduly high or fixed, thus creating an unfair competitive environment for those seeking insurance, and that the insurance contracts and policies issued by insurance companies meet minimum standards set by State or Federal law.

The business of insurance has been in existence since the 17th and 18th centuries although these were limited to inuring against the loss of property (homes in particular). It was only in the 20th century when insurance policies were offered for health, life, and automobiles.

This article does not intend to give any legal advice. For further reading, visit the site of Tampa insurance lawyers at Shavitz Law.