Government Regulation

The insurance industry is heavily regulated in the United States and Canada. In the United States, the state governments have nearly complete control of insurance regulation. In Canada, both the federal government and the provincial governments regulate the industry.

Insurance companies are regulated mainly because policyholders pay in advance for benefits. Government regulations help ensure that the companies remain financially sound and so can meet their obligations. Government agencies periodically examine each company's methods, review its investments, and see that it has adequate funds in reserve to pay future claims. The government enforces laws concerning trade and marketing practices of insurance companies. Such laws are designed to prevent the sale of policies with unfair or misleading terms and to help guarantee that people who need insurance can obtain it.

In the United States, each state has a department that regulates and licenses insurance companies operating within the state. In Canada, the federal government deals chiefly with matters involving the financial stability of insurance companies. Provincial governments supervise the business and marketing practices.