Life insurance is governed primarily by the State, rather than Federal laws.  The law to empower states with regard to the insurance industry was passed by congress and is known as the McCarron-Ferguson Act of 1945.  This law grants that insurance regulation is largely exempt from Federal law, and gives state governments the right to regulate the insurance industry as they see fit.  Practically speaking this division of legislation can create a nightmare for life insurance companies who operate in all 50 states.  To some extent individual state regulation is cumbersome, but luckily for modern companies most state laws have been standardized, though some significant difference can exists such as grace period and free look laws.  Certain products or forms may also gain approval in some states, but fail to be approved in others, or fail to gain approval at the same time, which can be a headache for agents and insurance companies alike.

Every life insurance company must also apply to operate in each state.  When the state gives permission to do business within their borders they grant what is known as a certificate of authority.  The certificate authority allows an insurance company to sell products to the state’s consumers, but individual products must still be cleared with state regulatory bodies.

Governing Agencies

Every state has an insurance bureau which provides oversight and regulation on the life insurance industry, amongst other insurance industries.

The agencies that attempt to standardize life insurance laws across states are the National Conference of Insurance Legislators (NCOIL), the National Associate of Insurance Commissioners (NAIC), and especially the Interstate Compact (IIPRC).  These agencies are responsible for working with legislatures and creating laws across jurisdictions that are beneficial to consumers and allow for a healthy business operating environment for life insurance companies.

Variable life insurance and variable annuities are considered investments products by law.  Because these variable polices are investment products, they fall under the jurisdiction of the Securities and Exchange Commission.  These laws are in conjunction with regulations from state life insurance legislators.

Guarantee Associations Protect Policy Owners and Beneficiaries

Every state also has a state guarantee association.  This association is responsible for guaranteeing cash value and death benefits in the case of a life insurance company insolvency.  These amounts may differ but generally up to $100,000 of cash value is protected and up to $300,000 of death benefit payments per person.

Entities Governing Life Insurance In Canada

Canadian life insurance is regulated at both the state and provincial level.  The governing bodies include Assuris, Canadian Deposit Insurance Corporation (CDIC), The Office of the Superintendent of Financial Institutions (OSFI), The Financial Services Commission of Ontario (FSCO), The Financial Consumer Agency of Canada (FCAC), The Canadian Council of Insurance Regulators (CCIR), and The Financial Transactions and Reports Analysis Centre Of Canada (FINTRAC).  While some major US life insurers operate in Canada certainly not all have the taken the legal and compliance steps to obtain licensing to operate in this jurisdiction.

Questions Or Complaints?

Remember that every state has a consumer affairs department, as well as a bureau of insurance.  The attorney general’s office of your home state will also look into and advice on any instances of gross malpractice by the life insurance industry or an agent.  Please do not hesitate to contact your state’s resources if needed for protection or questions.  Life Ant also advices our clients to take every precaution when it comes to securing their finances.

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