Social Insurance

Actuaries define social insurance as a government-sponsored insurance program that is defined by statute, serves a defined population, and is funded through premiums or taxes paid by or on behalf of participants. Participation is either compulsory or the program is subsidized heavily enough that most eligible individuals choose to participate.

In the U.S., programs that meet this definition include Social Security, Medicare, the PBGC program, the railroad retirement program and state-sponsored unemployment insurance programs.

Insurance Policy

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by covered perils under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they feature boilerplate language which is similar across a wide variety of different types of insurance policies.

The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer. In some cases, however, supplementary writings such as letters sent after the final agreement can make the insurance policy a non-integrated contract. One insurance textbook states that "courts consider all prior negotiations or agreements ... every contractual term in the policy at the time of delivery, as well as those written afterwards as policy riders and endorsements ... with both parties' consent, are part of written policy". The textbook also states that the policy must refer to all papers which are part of the policy. Oral agreements are subject to the parol evidence rule, and may not be considered part of the policy. Advertising materials and circulars are typically not part of a policy. Oral contracts pending the issuance of a written policy can occur.

Regulation Of The Business Of Insurance

Insurance regulation that governs the business of insurance is typically aimed at assuring the solvency of insurance companies. Thus, this type of regulation governs capitalization, reserve policies, rates and various other "back office" processes.

In the United States each state typically has a statute creating an administrative agency. These state agencies are typically called the Department of Insurance, or some similar name, and the head official is the Insurance Commissioner, or a similar titled officer. The agency then creates a group of administrative regulations to govern insurance companies which are domiciled in, or do business in the state.

The origins of insurance policies in general differs through various countries. Limited policies (particularly against damage to homes) can be traced to the 17th and 18th centuries, though establishment of newer policies (such as health insurance and car insurance) did not come until the 20th century.

In the United States regulation of insurance companies is almost exclusively conducted by the several states and their insurance departments. Various states have different names for their regulatory agencies and regulators. In many states the department is called the Department of Insurance, and the regulator is called the Insurance Commissioner - although there are numerous variations. The federal government has explicitly exempted insurance from federal regulation in most cases.

However, regulation of the insurance industry began in the 1940s in the United States, through several United States Supreme Court rulings. The first ruling on insurance had taken place in 1868 (in the Paul v. Virginia ruling), with the supreme court ruling that insurance policy contracts were not in themselves commercial contracts. This stance did not change until 1944 (in the United States v. South-Eastern Underwriters Association ruling ), when the Supreme court upheld a ruling stating that policies were commercial, and thus were regulatable as other similar contracts were.

Nowadays, many countries - and states in the United States - regulate insurance companies through laws, guidelines and independent commissions and regulatory bodies. These laws and statutes ensure that the policy holder is protected against bad faith claims on the insurer's part, that premiums are not unduly high (or fixed), and that contracts and policies issued meet a minimum standard.

A bad faith action may constitute several possibilities; the insurer denies a claim which is seemingly valid in the contract or policy, the insurer refuses to pay out for an unreasonable amount of time, the insurer lays the burden of proof on the insured - often in the case where the claim is unprovable. Other issues of insurance law may arise when price fixing occurs between insurers, creating an unfair competitive environment for consumers. A notable example of this is where Zurich Financial Services - along with several other insurers - inflated policy prices in an anti-competitive fashion. If an insurer is found to be guilty of fraud or deception, they can be fined either by regulatory bodies, or in a lawsuit by the insured or surrounding party. In more severe cases, or if the party has had a series of complaints or rulings, the insurers license may be revoked or suspended.

In the case that an insurer declares bankruptcy, many countries operate independent services and regulation to ensure as little financial hardship is incurred as possible (National Association of Insurance Commissioners operates such a service in the United States).