NJ Laws, Rules and
Regulations - Pertinent to
Property & Casualty
Insurance Exam
Questions and Complete
Solutions Graded A+
Denning [Date] [Course title]
,State Regulatory Jurisdiction - Answer: The purpose of state insurance regulation is to protect the public
against the insolvency of insurers as well. The area of insurance is subject to state and federal regulation
because it is a business that is affected with a public interest.
Legislation - Answer: One of the primary methods the government uses to regulate the insurance
business. Legislation creates insurance law.
Insurance Commissioner - Answer: - usually appointed by the governor
- possesses broad powers to enforce the insurance laws (code) of his particular state
- has the authority to license insurers & producers, regulate rates and conduct investigations
State Regulation - Answer: The state insurance department is generally responsible for:
- issuing rules and regulations (the commissioner enforces laws and issues rules based on law - only the
legislature enacts or passes laws)
- licensing and supervising insurance producers and brokers
- controlling the types of insurance contracts that may be sold
- determining the amount of reserves an insurer must maintain ( reserves are the monies the company
must set aside to pay future claims and guarantee financial solvency)
- overseeing insurance marketing practices
- investigating customer complaints
Federal Laws and Court Cases - Answer: Over time federal statues and court cases have resolved that
individual states have primary regulatory responsibility of the insurance industry. However, other
federal statues impact the insurance industry and may be on the insurance licensing exam.
Paul V. Virginia - Answer: This court case heard in 1869 declared that an insurance policy was not an
article of commerce and that it was actually a contract of indemnity. Therefore, because insurance was
not commerce, it was also not interstate commerce and the federal government (i.e. congress) had no
authority to regulate it.
US v. South-Eastern Underwriters Association (1944) - Answer: This court case found that although Paul
V. Virginia affirmed the authority of each state to regulate insurance, Congress still had the authority to
, regulate the insurance industry as a whole. After an appeal, a further ruling held that the insurance
business was, in fact, interstate commerce and thus subject to federal anti-trust laws.
McCarran-Ferguson Act (Public Law 15) - Answer: In 1945, over ruling the court by stating affirmatively
that regulation of insurance was the job of the states, not the federal government. The law exempted
insurance from federal antitrust rules if it was covered by state regulation. If there are any "holes" in
state regulations, the Fed address it. This is what is in place today. ORDER OF REGULATION IS: STATE,
THEN FEDERAL GOVERNMENT
Fair Credit Reporting Act (1970) - Answer: This consumer protection bill requires fair and accurate
reporting of information about consumers, including applicants for insurance. Insurers must inform
applicants about any investigations being made.
National Do-Not-Call Registry - Answer: Managed by the federal trade commission (FTC) and allows
consumers to place their personal telephone and cellphone numbers on a list telling telemarketers
which numbers they are prohibited from calling.
*political, charitable, debt collection and informational calls still allowed
Department of Banking and Insurance - Answer: The Department of Banking and Insurance regulates
the banking and insurance industries in NJ.
CEO of Department = Commissioner (appointed by governor)
Broad Powers - Answer: The Commissioner is assigned broad powers and responsibilities regarding the
regulation of insurance.
- conduct investigations
- administer oaths
- interrogate licensees and others
- issue subpoenas to any licensees or other persons with regard to any investigations, hearings or other
proceedings
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