Insurance Regulation

Grand Prairie insurance attorneys need to understand the purpose and rules of insurance regulation.
As stated by the Texas Supreme Court in 1951, the insurance business affects the public interest and thus is subject to extensive regulation to prevent abuses. The rationale for this principle bears quoting at length. In an early case, the United States Supreme Court stated:
A contract for fire insurance is one for indemnity against loss, and is personal. The admission, however, does not take us far in the solution of the question presented. Its personal character certainly does not of itself preclude regulation, for there are many examples of government regulation in personal contracts, and in the statutes of every state in the Union superintendence and control over the business of insurance are exercised, varying in details and extent. We need not particularize in detail. We need only say that there was quite early state provision for what is known as the unearned premium fund or reserve; then came the limitation of dividends, the publishing of accounts, valued policies, standards of policies, prescribing investment, requiring deposits in money or bonds, confining the business to corporations, preventing discrimination in rates, limitations of risks, and other regulations equally restrictive. In other words, the state has stepped in and imposed conditions upon the companies, restraining the absolute liberty which businesses strictly private are permitted to exercise. Those regulations exhibit it to be the conception of the lawmaking bodies of the country without exception that the business of insurance so far affects the public welfare as to invoke and require governmental regulation. A conception so general cannot be without cause. The universal sense of a people cannot be accidental; its persistence saves it from the charge of unconsidered impulse, and its estimate of insurance certainly has substantial impulse, and its estimate of insurance certainly has substantial basis. Accidental fires are inevitable, and the extent of loss very great. The effect of insurance – indeed, it has been said to be its fundamental object – is to distribute the loss over as wide an area as possible. In other words, the loss is spread over the country, the disaster to an individual is shared by many, the disaster to a community shared by other communities; great catastrophes are thereby lessened, and, it may be, repaired. In assimilation of insurance to a tax, the companies have been said to be mere machinery by which the inevitable losses by fire are distributed so as to fall as lightly as possible on the public at large, the body of the insured, not the companies, paying the tax. Their efficiency, therefore, and solvency, are of great concern. The other objects, direct and indirect, of insurance, we need not mention. Indeed, it may be enough to say, without stating other effects of insurance, that a large part of the countries wealth, subject to uncertainty of loss through fire, is protected by insurance. This demonstrates the interest of the public in it, and we need not dispute with the economists that this is the result of the “substitution of certain for uncertain loss,’ or the diffusion of positive loss over a large group of persons, as we have already said to be considered a matter of public concern to regulate it, and, governmental insurance has its advocates and even examples. Contracts of insurance, therefore, have greater public consequence than contracts between individuals to do or not to do a particular thing whose effect stops with the individuals. We may say in passing that when the effect goes beyond that, there are many examples of regulation.
This public interest has led to extensive statutory regulations of policy forms, rates, solvency, marketing, and claims settlement practices. Most this can be found in the Texas Insurance Code.
Similar concerns led to judicial recognition of a common law duty of good faith and fair dealing owed by an insurer to its insured and arising out of the special relationship between the parties. In addition, regulations are found in Volume 28 of the Texas Administrative Code.
The best thing to do is to see an experienced Insurance Law Attorney when you have concerns about the way you are treated in an insurance situation.