What are insurance companies—and who regulates them?

For you, insurance should be easy. Easy to research. Easy to reach us. Easy to understand what your policy does and does not cover.

For us, that means hard work. It takes years to bring an insurance company, platform, or even one new product to market. That effort on the front end means, when you need us, we are ready. But who is “we?”

Carriers: The big companies

Companies. Carriers. Insurers. Three words that mean the same thing: Large corporations that sell insurance.

For health insurance, some big names are United Healthcare, Wellpoint and Humana.

Life insurance has MetLife, Northwestern Mutual, Prudential of America and MassMutual, among others.

The property and casualty category is a multi-tasker. It includes all the national auto insurance companies, homeowners and boat or motorcycle insurers, professional and personal liability carriers, and more.

Brokers and agents: The salespeople

Agents represent the big companies. You might talk to them face-to-face at your place or their office, over the phone, online, or never. They can be captive agents that exclusively work with one of the big companies or independent agents that represent several large insurance companies.

Brokers are “freelance” agents who represent the insurance buyer (company or individual). They sell plans from many different insurance companies. Want to comparison shop? Call a broker.

Within the brokers and agents world, you’ll also find companies known as Managing General Agents,or MGAs. These are like agents on steroids, who represent big companies but do a whole lot more than sell you your policy, like approving your application and even handling claims.

Who regulates insurance companies?

This business involves a lot of trust. Insurers trust you to tell the truth and to “practice safe stuff” … lock the doors, pay attention when cooking, eyes on the road—not on the phone, and so forth.

And you trust that they will help you when you need it—when you have a loss or cause a loss for someone else.

Insurance involves money, promises, risk and predictions. To protect the public, every state has a Department of Insurance responsible for regulating insurance within that state to keep extremely close tabs on insurance companies. States also make laws and take insurers to court if they suspect something fishy.

These laws and rules are designed to make insurance companies:

  • Stay in solid financial shape—make sure they have enough money to pay all claims, long into the future
  • Clearly explain plans and policies—help you to make the right decisions when buying a complicated product
  • Charge premiums that make sense—insurance companies need to set rates high enough to cover the costs of paying claims, but low enough that people can afford them
  • Make insurance available to everyone–this can be a tough one. The government wants insurance companies to cover most, if not all, who want it. In cases where it would be too risky (or too expensive) for the private insurance market to provide solutions, the government has to step in, as with the National Flood Insurance Program run by FEMA
  • License their agents and brokers—insurance reps need to know this business inside and out. Math, contracts, state laws, regulations, the ABC’s of insurance (yeah, we know, for the public it’s more like zzz). We live and breathe this stuff. And we’ve passed the tests to prove it.
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