Regulation in the insurance industry benefits insurance companies and consumers. State and federal oversights of the industry provide a regulatory framework for companies to operate in with the goal of maintaining industry strength and increasing consumer confidence. This keeps insurance companies solvent enough to continue paying out claims and keeping consumers happy.
Each state in the U.S. has adopted laws granting them varying degrees of power to approve or reject insurance premium increases. Many states, like Massachusetts, require insurance companies to submit proposals for rate increases sighting legitimate reasons or needs for them. According to the Consumer Watchdog website, in 2010 the Massachusetts Division of Insurance rejected more than 230 proposed rate increases by insurance companies that it deemed excessive. Some proposed rate increases would have raised premiums for small businesses by as much as 32 percent.
Insurance Business Monitoring
Many state government regulations require insurance companies to submit quarterly reports to the Department of Insurance, relaying business practices, profits and adherence to operating regulations of the companies. This allows states to identify any companies that are operating outside of acceptable guidelines and spot any potential fraudulent practices such as improper filings or failures to pay policy claims before too much damage is done. Some states, like Pennsylvania, also publish lists of insurance companies and agents that have had action taken against them for fraudulent practices as a further means of regulation.
Rights of Consumers
Insurance regulation also bestows rights to consumers in how policy terms are disclosed to them and what avenues consumers have in filing complaints against insurance companies. This works to discourage occurrences of shadowy or difficult to understand insurance policies that ultimately do not offer consumers the coverage they thinks they are getting or the coverage they need. Consumers, who feel taken advantage of, have recourse in filing a complaint with the State Attorney's office.