Insurance is regulated at a state level because every state is different, and every state has a unique risk pool. I know that explanation sounds vague, and I doubt that answer would get me any credit on an insurance exam. Generally, the higher the probability of a covered loss occurring in a state, the higher the premium for that coverage will be in that state. To put it simply, you will probably have to pay more for earthquake insurance on a house in South Carolina than a house in Texas. Every state faces different risks based on geography, population, and many other factors. Insurance is designed to be personalized based on the policyholder’s location, risk exposures, and needs. The state-regulation system allows insurance to be regulated at a more local level than other financial markets.
Insurance in every individual state is regulated by a state department of insurance, led by an agency director or chief regulator who serves as the insurance commissioner for that state. The insurance commissioner has the responsibility of approving various state insurance rates, licensing new insurance providers and agents, and regularly evaluating the insurance companies operating within the state. This department protects consumers in that state by enforcing insurance laws and rates and ensuring the solvency of insurance providers within the state. The insurance commissioner works to make insurance regulations clear and hold insurance companies accountable for protecting their clients in the event of a covered loss.
The exact extent of the commissioner’s power depends on the state. South Carolina’s current insurance commissioner is Raymond Farmer, who was appointed by the governor. Whereas the insurance commissioner in Georgia, currently Ralph Hudgens, is elected. This serves as just another example of the variation between state insurance departments.
The chief insurance regulators from all 50 states come together to form the NAIC, the National Association of Insurance Commissioners. The NAIC works to establish national standards and regulations in the insurance industry, although the individual states can adopt these regulations at their own discretion. The NAIC also works to ensure accurate and conservative financial reporting by insurance companies. The NAIC aims to provide the insurance industry with a basic level of consistency across the country, while still allowing the state insurance departments to retain ultimate control.
Insurance is one of the most heavily regulated industries in the United States. Home insurance is not required by any state insurance departments, so there are no minimum coverage limits. However, home insurance is required by banks and lending institutions to obtain a mortgage.
At Triest Agency, we have been working with homeowners in Georgia and South Carolina for over a century. We know the market, and we know the homes we are insuring. With access to hundreds of insurance providers, we can be sure that we are getting you the best rate and most complete coverage for your home. Call Triest Agency today at 843-556-6232 or visit our website http://www.triestagency.com/home-insurance-quote.html.
Triest Agency Summer 2017 Intern
The University of Georgia Honors College, Athens, Georgia
Risk Management & Insurance Major
Terry College of Business