Auto Insurance Rates Laws & Regulations
The McCarran–Ferguson Act which was passed in 1945 made a clear points that the insurance business was allowed by Congress to assume control over the allocation of power over the insurance business. In this law, Congress redefined the authority of the local state governments over the regulation of insurance and developed some strategies where laws would become a joint and mutual initiative between federal government and state governments. According to the McCarran-Ferguson Act, the federal government controls certain areas of the industry, such as insurance rates and insurers unfair practices.
After passage of Public Law 15, regulation of premium rates began. Most of the laws enacted were basically generated from the sets of laws approved by the NAIC (National Association of Insurance Commissioners) where auto insurance rates were made to enforce certain needs that car insurance rates be adequate, reasonable, responsive, and nondiscriminatory.
Historically,The first stage of insurance rates regulations were the related to the antitrust laws. Again, the main purpose of the regulation was to keep rates as low as possible, through enforced competition. But the anti trust laws could not stop discriminatory measures, especially against smaller size risks. Insurance rates second development stages came with the development of fire insurance, through imposing antidiscriminatory statutes that produced laws prohibiting discrimination against risks in the same class. The goal of the antidiscriminatory laws was to aver discrimination against individuals within the same class. These, again, failed because it was not possible to determine exactly if an individual belongs to this class or the other due to the lack of general classification criteria.
After that evolved few standards to assure the reasonableness, adequacy, fairness, and responsiveness of insurance rates. Insurance rates should be reasonable.They also should have some minimum of adequacy standard and above this level the rates may go to any height. The standard of reasonableness was crafted to protect against the dangers of creating oligopolistic or monopolistic settings.
Auto Insurance Rates Laws. Fifty years ago very few states mandate the filing or preapproval of automobile insurance rates. Nowadays, each and every state including DC & Puerto Rico have sets of laws regulating the automobile insurance rates.
In Illinois, the insurance commissioner must approve each new auto insurance rates. The commissioner must also be on file as approving each increase in auto insurance rates for insurers.