LOMA 281 Module 1 Lesson 2

Organization and Regulation of Insurance Companies

Summary of Key Points
The financial services industry includes financial institutions that help people save, borrow,
invest, and manage money. (Examples: banks, insurance companies, brokerage firms, mutual
fund companies, and finance companies)

Deregulation and other factors have contributed to the removal of barriers that historically
prevented different financial institutions from competing with each other. This evolution of the
insurance industry is characterized by
• Convergence
• Consolidation
• Globalization

Insurance companies sell products that help people manage

• Personal risk
• Property damage risk
• Liability risk

All life insurance companies are corporations that are distinct from their owners. Typically,
insurance companies are organized as stock insurance companies, mutual insurance companies,
or fraternal benefit societies.

The primary goals of insurance regulation are to make sure insurers

• Remain solvent—able to pay all obligations on time
• Conduct their business fairly, honestly, and competently

In the United States, insurance is regulated mainly by state insurance departments. States
oversee insurers’
• Market conduct practices
• Financial condition
• Policy forms

The federal government regulates

• Sales of variable life insurance and annuities
• Consumer protections
• Consumer privacy
• Income taxes
• Antiterrorism

Federal laws pertaining to insurance industry: McCarran-Ferguson Act and Dodd-Frank Act,
which established the Federal Insurance Office (FIO).

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