Why Does the Life Insurance Industry Have a PERFECT Record?  Reinsurance

As stated in our “PERFECT Record” edition of Latest News, “The McCarran Ferguson Act was passed by Congress in 1945 to return insurance regulation to the states. Individual state insurance commissions have the ability to take over life insurance companies and state guaranty funds and associations have been established to pay claims. These state associations work through The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). Each state also sets reserve requirements for life insurance companies.”

In 1869 the Supreme Court ruled in Paul vs. Virginia that insurance was not interstate commerce and as such was not subject to the Commerce Clause in the U.S. Constitution. From that year through 1944 the regulation of insurers rested with each state. Nothing changed from the Civil War era until the World War II era. That is, until 1944 when the Supreme Court ruled in the United States vs. South-Eastern Underwriters Association that insurance was indeed interstate commerce.

This ruling prompted the National Association of Insurance Commissioners (NAIC) to introduce legislation that would rest insurance regulation with the states once and for all. The bill was sponsored by United States Senators, Pat McCarran, a Democrat from Nevada and Homer Ferguson, a Republican from this article writer’s home state of Michigan. The bill passed both the House and the Senate and was signed into law by President Franklin Delano Roosevelt in 1945.

It is important to note that the McCarran Ferguson Act was affirmed by the Gramm‐Leach‐Bliley Act in 1999, which required that insurers and other financial institutions explain their information-sharing practices to consumers. Even with the sweeping federal financial regulation created by the Dodd‐Frank Act in 2010, which created the Federal Insurance Office (FIO), an arm of the United States Treasury, it is important to note that the FIO is not a regulatory agency and that the FIO does not displace state insurance regulation. In fact, in a 2013 report, the FIO has acknowledged the strengths and accomplishments of the states in regulating the insurance industry. While the FIO recommended more uniformity in state regulatory practices, the office noted that the states were well on their way to creating uniformity through the efforts of the NAIC.

NOLHGA as noted above, is the national association of state associations and is the ultimate safety net for consumers. NOLHGA assures that each state’s policyholders receive coverage up to their individual state’s guaranty limits, even if their insurer were to become insolvent. All fifty states and the District of Columbia are voluntary members of the national association. Since 1983, NOLHGA has paid the claims of more than 2,600,000 policyholders, has guaranteed more than $25,600,000,000 in policy payments and contributed $6,900,000,000 to the fulfillment of insurer obligations.

For more information on the life insurance industry’s PERFECT record, the McCarran Ferguson Act,  NOLHGA and how Senior Life Settlements provide more options for your clients, call West Coast Settlements at (657) 254-4300 or send an email to info@westcoastsettlements.com.