Any business that operates across state lines is subject to federal regulation. Few people realize that the insurance industry is exempt from this requirement and is not subject to federal regulation. The insurance industries exemption from federal regulation also includes exemption from anti-trust laws. Anti-trust laws are the laws that protect consumers by not allowing competing suppliers to discuss how they could work together instead of compete.
The Huffington Post ran an article on the implications for consumers of this exemption for federal regulation. The article was written by ValChoice founder, Dan Karr. Check out the full article by clicking this link. This blog adds some additional points.
Is Insurance Interstate Commerce?
Without doubt, the answer is yes. Insurance is often run by a large company with employees concentrated in headquarter locations. These companies get licensed at the state level, but largely operate remotely. In some cases the insurance companies will setup small local entities doing billing, or possibly even call centers, but reality is, these are largely out-of-state companies doing business across state lines.
Let’s draw an analogy. If a Chinese company is licensed by the FDA to sell medical instruments into the U.S., has their offices located overseas, they are a foreign entity doing business inside our country. The fact that they are licensed in the U.S. and may even have technical support and sales offices here, does not make them a local company. Similarly, if an insurance company located in one state does business in another state based on a license to operate, it is a foreign entity doing business in that state where they are not headquartered and should not be exempt from federal regulation.
The Impact of Exemption on Consumers
The lack of federal regulation disadvantages the consumer. In todays mobile world if you have an accident or problem while traveling and the other parties insurance company is uncooperative, what are your means for extracting justice? Unfortunately, they are very limited.
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