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car insurance regulations

ash wednesday : Who regulates the car insurance companies?

Response : Ash, an excellent question. Suprisingly there is a lot of regulations for the insurance companies and hence the fear that if I get a cheap car insurance quote from a completely new insurance company what would happen? Are they stable? You need not worry about this since aas per the insurance regulations there is a limit of business also which an insurance company can undertake.

Because car insurance companies deal in two different worlds, financial and as a business in general, such companies fall under multiple areas of regulation. This includes being a financial institution, operating as a business, the collection of business taxes, and provide financial loss coverage. As a result, automobile insurers find their organizations having to respond to multiple government agencies on a regular basis to address regulatory requirements.

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Because car inusrers operate as licensed business they must obtain business permits, licenses, and tax permits from the communities and states they operate in. A business is not required to be licensed in all 50 U.S. states, but where the business has operations, permits are necessary.

Insurance companies have to abide by the same regulations and laws as any other business in a given region or state. There is no exception.

This includes a variety of business laws that affect employment, property zoning, and managing financial activities for customers. The majority of these laws are overseen and enforced by city, county, and state government agencies charged with these responsibilities.

Car insurers also must operate with relevant tax laws as well, weaving through requirements at both the state and federal level. Business income taxes, employee payroll tax withholding, and sales taxes as well as insurance specific taxes all need to be collected and paid to the respective agencies to stay current with applicable tax law. Federal and state tax agencies manage the oversight of such tax activities and enforce them as well with civil as well as criminal penalties.

Because insurance companies have the ability to collect a large amount of customer money before any kind of coverage has to be paid, there is the risk that unscrupulous types can run off with the cash before a claim is filed. As an added level of regulation, insurance companies in general undergo industry-specific regulation in most states to avoid this problem.

This oversight licenses the business to operate as an insurance provider and both audits and investigates inappropriate activity where it is identified. We can help you find the best car insruance coveragae by sending your car insurance quotes. All you need to do is enter your ZIP code in our car insurance comparison tool.

Insurance companies, including auto insurance providers, have to be able to show they have sufficient financial reserves to remain solvent. They also need to be able to provide accounting records on demand that can show where customers’ funds have been deposited, how funds have been spent, and that reserves are protect to pay valid claims that are submitted.

Finally, many states collect various fees on insurance companies through policies. These funds have to be deposited separately and then transmitted to the given state, which also requires auditing and record-keeping for review.

All 50 states have departments that are specifically dedicated to insurance company regulation. They manage insurance policies, implement to large insurance statutory codes passed by state legislatures, and they audit and investigate insurance companies as necessary. Such agencies also review insurance companies’ premium rates to make sure they are not gouging or onerous on customers. Most such agencies are led by an elected position. The lead position is filled by an insurance commissioner who is voted into office every four to six years.

In almost all insurance-specific regulation cases the federal government generally stays out of the review of car insurance companies except with taxes. Where federal taxes are due or payroll withholding needs to be collected, the Internal Revenue Service handles the oversight. Another area federal involvement will occur is if the insurer becomes insolvent and must declare bankruptcy as a business. Then the federal bankruptcy court becomes the overseer through a court trustee officer.

Because state departments in charge of insurance regulation collect so much information on insurance companies, including automobile insurers, they produce a significant number of reports quarterly and annually. This information is available to the public and can provide interesting details on how insurance companies are operating in a given state.

Where insurance state departments have adequately integrated operations with the Internet, many of the reports can be obtained and downloaded easily.

While some of the reports can be highly technical in nature, they provide detailed information on how car insurance companies and other insurance providers are managing their accounts, rates, and solvency. For the keen reader, this data can signal when it may be time to switch insurers.

Consumers can then take government reporting information and add it to the details they can gain from insurance comparison websites to find the best car insurance companies for their needs. The best policies for car coverage are the ones where customers do their own research.

Between government reports and Internet comparison sites, a treasure trove of data exists for very informed comparison-shopping.

As can be seen above, car insurance companies do not operate wildly on their own without oversight. For a number of reasons such businesses interact with government and regulation everyday. As a result, insurers have to operating in a certain fashion sometimes to stay in good graces with the law as well as keep their business profitable.

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