Insurance companies follow a variety of regulations from each state is which they write business. States generally regulate insurance rates, monitor complaints, and is are patchwork of regulations that may need federal charter for national insurers. The states were left to regulate insurance carriers by an act of Congress.
One way in which states regulate insurance companies is to make sure they are not charging too much for the policies that they sell. This is especially true for property and casualty insurers that sell auto and home insurance policies. These insurance companies cannot charge any rate they want on their individual policies. When they want to increase the rate for a particular policy they need to file a request with the department of insurance for the state in which they want to raise the rate. An insurer can use two types of filing for these requests and they are a use and file and file and use method. More often though an insurer needs to file a rate increase request before it can be used.
Another way in which states regulate property and casualty insurance companies is to monitor the amount of complaints that are received. Individual’s generally lodge complaints against an insurance company directly to their state’s department of insurance. Depending on what the complaint pertains to a state’s department of insurance can take a variety of actions. The most general type of complaint that is received is when an insurer takes to long to settle a claim or a claim was denied. When there are too many complaints that come in for a particular insurer a state department of insurance can investigate and assess penalties if violations are found.
Many national insurers would like to have a national charter for their insurance activities. This is because most insurers that operate either nationally or regionally need to follow regulations is each state in which they do business. A national charter would create an umbrella for some insurers in which they are regulated by one entity or set of rules. Manya times though having a national or federal agency set rules means they are not always as tough as rules that a state can setup. A national charter for insurance practices would trump any currently existing state laws that regulate and remedy any abusive activities.
In 1999 the Gramm-Leach-Biley Financial Services Modernization Act left the regulation of insurance activities to the individual states. The act specifically protected thirteen areas of state insurance regulation from federal preemption. The act also let many bank to buy and own an insurance business which they could not do before.