INSURANCE COMPANIES

Life Insurance Companies: Regulations

GONZALES, Genevieve M.
What are the major regulations governing
life insurance companies?

 McCarran-Ferguson Act of 1945

• The most important legislation affecting the
regulation of life insurance companies
• Confirms the primacy of the state over federal
regulation of insurance companies
State insurance commissions supervise
and examine insurance companies using a
coordinated examination system
developed by the National Association of
Insurance Commissioners (NAIC).

Regulations cover areas such as insurance

premiums, insurer licensing, sales
practices, commission charges and the
types of assets in which the insurers may
invest.
In the early 2004…
Prospect of the federal government
gaining a role in the regulation of the
insurance industry.

Plans for 2004 legislation that would

create a council of federal and state
officials to oversee insurance nationally
with a presidential appointee as its head.
This would force states to adopt uniform
standards and permit the market to
determine insurance prices.

The proposal met resistance from the

states, consumer groups, and some
members of the Congress.
Insurance Guarantee Funds
A fund of required contributions from the
within-state insurance companies to
compensate insurance company
policyholders in the event of failure.
State Guarantee Funds vs. Deposit
Insurance
1. Although these programs are sponsored
by state insurance regulators, they are
actually run and administered by the
private insurance companies themselves.

2. No permanent guarantee fund exists

(except property-casualty and life
guarantee funds in the state of New
York).
3. The size of the required contributions
that surviving insurers make to protect
policyholders in failed insurance
companies differs widely from state to
state.

4. A delay usually occurs before a small

policyholders receive the cash surrender
values of their policies or other payment
obligations from the guarantee fund.
Financial Services Modernization Act of
1999
Will have a major impact on the insurance
(both life insurance and property-casualty
insurance) industry in the future

Allows insurance companies, commercial

banks, and investment banks to engage in
each other’s business