In: Operations Management
What is the role of insurance legislation in effective management of insurance companies? Illustrate with one example of a specific insurance legislation.
Role of insurance legislation in the effective management of
insurance companies is to maintain the insolvency of the insurer by
protecting the consumers and their ethical rights. Apart from that,
making insurance available for the people who are unable to get
insurance for future benefit and are less risky.
The McCarran-Ferguson Act (1945) was benchmark legislation for
insurance companies and insurance holders. Section 12B, 15, 16A,
and 20 successfully tried to protect the insolvency of the insurer
by protecting their consumer rights. Section 16A was specially
recommended to protect customers from the insolvency. The
legislation allowed customers to claim their due compensation in
case of insolvency. Moreover, section 23A was specially recommended
to provide financial support to the insurance companies so that
they can compensate consumers in case of insolvency maintaining
their consumer right.