Insurance Handbook

There are three main types of insurance. Property/casualty consists mainly of auto, home and commercial insurance. Life/health consists mainly of traditional life insurance and annuity products. Both of these sectors include some health insurance. The third sector, health insurance, includes products from private health insurers, as well as government programs.


Insurance is regulated by the states, with each state having its own set of statutes and rules. State insurance departments oversee insurer solvency, review market conduct, rule on requests for rate increases for coverage, among other things. The National Association of Insurance Commissioners develops model rules and regulations for the industry, many of which must be approved by state legislatures before they can be implemented.

The McCarran-Ferguson Act, passed by Congress in 1945, provides the insurance
industry with a limited exemption to federal antitrust laws, allowing certain activities such as joint development of common insurance forms. The act confirms state regulation of the insurance industry as being in the public interest. However, there have been challenges to state regulation, including proposals for a federal role in creating a more uniform system and allowing insurers the choice of a federal or state charter similar to banks.


Insurers are required to use statutory accounting principles (SAP) when filing annual financial reports with state regulators and the Internal Revenue Service. The SAP system is more conservative than generally accepted accounting principles (GAAP), as defined by the Financial Accounting Standards Board. GAAP standards are widely used by most other industries in the United States.