In the United States, no federal agency had been formed to regulate insurance companies. However, the individual states regulate these companies. The insurance regulatory agency in the states might have various names, like ‘Department of Insurance’, ‘Insurance Bureau’, ‘Division of Insurance’, etc. Normally, these agencies would be headed by a person appointed by the state government. That official would have a title like ‘Director of Insurance’, ‘Commissioner of Insurance’, etc. In certain states, the director or the commissioner would be appointed by the state Governor and in certain other states, he/she would be an elected person.
The main function of the department of insurance in each state is to ensure that the insurance companies operating in that state are financially sound. Only then the insurance company would be able to meet all the financial obligations and pay the claims. The insurance companies should meet fixed financial requirements. They should periodically demonstrate to the department of insurance of that state that the minimum financial requirements are met or exceeded. This is normally done on an annual basis and the permission to continue the insurance business would be granted by the state regulatory agency. If any insurance company fails to comply with this requirement, the regulatory agency would take action against that company, which could include the prevention of the operation of the company in that state.
Nearly all the states had formulated laws for regulating the insurance business. These laws are designed to ensure complete fairness in the dealing of the insurance companies with the policyholders and applicants for insurance. The department of insurance would strictly prohibit all ‘unfair trade practices’ and would investigate all the complaints of the consumers. If the insurance company is found to be at fault, the department of insurance could take appropriate action, which could inculde penalties for any violation of the set regulatory laws.Moreover, the department of insurance could review and approve the insurance policy forms of the insurance companies. The department of insurance holds the right to approve the rates that are charged for the various types of insurance policies. This is done to ensure compliance with the state laws which regulate the insurance rates.