FIN 3440 Lecture 3: FIN 3440 Ch3
Document Summary
Insurance in the united states has been regulated at the state level for a long time, and in modern times it has been heavily regulated. We stated last class that contracts, including insurance contracts, are a method to transfer risk. But you might wonder why the insurance industry, based upon a contract between the insurer and the insured, is so heavily regulated. The three principal reasons are to control or influence insurance industry solvency, pricing, and contract terms, because for the most part, insurance involves dealings between an insurance company and the relatively unsophisticated public. Industry abuses and problems over the years have led to increasing regulation of the insurance industry as a matter of public policy. Landmark legal actions that laid the foundation for today"s insurance regulatory structure throughout the united states are as follows: Paul vs. virginia, 1869: held that insurance (fire insurance here) is not commerce, therefore it is not subject to federal regulation as interstate commerce.
