State-based insurance regulation has existed for almost 200 years (187 to be exact) through a complex, but evolving and successful, regulatory framework. For most of these 200 years, states have regulated each insurance company offering products in their state, with states regulating both markets as a whole, as well as individual companies. The state regulator steps in the shoes of the consumer and also serves as the market overseer.
Over the years, the state-based nature of this framework has been threatened many times with federal legislation. Each time, states’ rights have won the day. Today, this framework is under a more serious threat – this time from secondary regulators, such as state treasurers, and from private litigants bringing “private regulator” actions. Partner Mary Jo Hudson reviews the current insurance regulatory framework, discusses examples of threats to this framework and makes recommendations for addressing these threats.