Which statement is correct regarding government involvement in insurance?

Which statement is correct regarding government involvement in insurance?

• A. Only state governments regulate insurance.
• B. Federal and state governments are involved in insurance to facilitate compulsory insurance purchases.
• C. There is no government involvement in insurance regulation.
• D. The federal government oversees all insurance pricing.

Answer: (B)

Insurance regulation involves both levels of government. States oversee most of the day-to-day regulation—licensing insurers, approving forms and rates, and monitoring solvency to protect consumers. The federal government also plays a role in insurance through nationwide programs and laws that affect insurance markets, such as health care reform, federal flood insurance, and social insurance programs. In many places, certain types of insurance are actually required by law (for example, auto liability insurance), which is what is meant by compulsory insurance purchases. So, saying that both federal and state governments are involved to facilitate compulsory insurance purchases captures how the system operates in practice. The other statements would ignore either the federal role, claim there’s no government involvement, or incorrectly claim the federal government controls all pricing.

Insurance regulation involves both levels of government. States oversee most of the day-to-day regulation—licensing insurers, approving forms and rates, and monitoring solvency to protect consumers. The federal government also plays a role in insurance through nationwide programs and laws that affect insurance markets, such as health care reform, federal flood insurance, and social insurance programs. In many places, certain types of insurance are actually required by law (for example, auto liability insurance), which is what is meant by compulsory insurance purchases. So, saying that both federal and state governments are involved to facilitate compulsory insurance purchases captures how the system operates in practice. The other statements would ignore either the federal role, claim there’s no government involvement, or incorrectly claim the federal government controls all pricing.