INSURANCEREGULATION

The Supreme Court reversed its decision in Paul, ruling that since insurance is interstate commerce, it is subject to regulation by the federal government.

In response to the above, Congress began to debate bills that would rule on industry regulation. Interestingly for you history buffs, the insurance industry viewed the overturn of Paul “with considerable alarm," according to one insurance textbook, and introduced bills to preserve the ability to develop rates.

While early bills failed, the National Association of Insurance Commissioners successfully drafted a bill that did pass, Public Law 15 or the McCarranFerguson Act. However, the caveat in McCarranFerguson was this – as long as the states adequately regulated the insurance industry, the federal government would not act to regulate the industry.

This is the common law of the land today. However, the Sherman Act, the Clayton Act and the Federal Trade Commission Act allow Congress to regulate if the states fail to do so. This is why so many questions that arise as you navigate your state's rules can best be answered by your state Independent Agents & Brokers Association. State legislators enact laws that admitted carriers must adhere to.

Who Regulates Now?

The practice of spreading risk is an integral part of how businesses can function. Under McCarranFerguson, state legislators enact laws governing the conduct of insurers within its boundaries. Whether domestic, foreign, or alien carriers, the state regulates them. Let's define these types of carriers.

Domestic carrier – A carrier domiciled in that state.

Foreign carrier – A carrier based in another state, even if that carrier has a branch in that state.

Alien – A carrier domiciled in another country.

Continued from page 23

Admitted carrier – Also known as a “standard market" insurer, that company files with each state's insurance commissioner (or another title) and that commissioner approved them to do business. An admitted carrier's customers can access that state's guaranty fund should the carrier become insolvent.

Non-admitted carriers do not file their forms and rates with the states. There are two types, approved (the state says “ you can operate here), and non-admitted, which the states have not approved.

State courts rule on insurance, and in the case of workers' compensation cases, administrative law judges in those states generally rule on whether an injury occurred in the scope and course of employment, and which benefits apply. Interestingly, each workers compensation policy refers to the state statutes that apply to any injury or illness arising in that state.