Reflecting Americans� pragmatic rather than theoretical approach to regulatory problems, the insurance legislative and regulatory process tends to respond to specific abuses, perceptions of abuse, and crises. From various regulatory activities, objectives, and legislation, the overall goals of insurance regulation can be discerned.

The first of two broad categories of insurance regulatory goals relates to the internal workings of the insurance business. These internal goals can be further divided into two groups. First, a fundamental function of the insurance mechanism is to provide security. To do so, it must be reliable. The cornerstone of reliability is regulation to ensure not only that an insurer is technically solvent but also that it is sufficiently solid so that it can properly perform its function in the community. Regulations for solidity abound in insurance law. Nevertheless, the government has yet to develop a way to immunize an insurer totally from potential insolvency. Consequently, an additional insurance regulatory goal is to protect policyowners and third-party claimants against insolvency losses through the use of guaranty funds.

The second broad category of internal goals embraces a wide range of insurance regulatory objectives regarding an insurer�s conduct in the marketplace. An insurer should treat its whole body of policyowners in a reasonable manner. The regulatory goal of reasonableness is therefore the basis for a variety of objectives, the most visible of which being reasonableness of price and product quality. (Reasonableness of price is determined by the cost of the product in relation to the value received.) The goal of equity refers to fair treatment between policyowners. For example, premiums cannot be unfairly discriminatory; each policyowner should bear only the cost of his or her own insurance so far as that cost can practicably be determined. The goal of fairness attempts to prevent mistreatment of individual policyowners in such areas as claims practices, agent misrepresentations, and service.

Without internal objectives the insurance business would not function in an acceptable manner. In addition to internal goals, there are external goals of society at large, arising from the relationship between the insurance business and the broader political, economic, and social environment within which the business functions.

One set of external goals stems from attitudes on liberty, democracy, and federalism (dispersing decision-making power away from the national government). Public policies and political structures place an emphasis on federalism. The McCarran Act explicitly recognizes the concept of federalism as it relates to insurance regulation. Although there is a continuing ebb and flow in the debate over state versus federal regulation, to date, the consensus supports the primacy of state control.

The second set of external goals that have an impact on the insurance system are those derived from economic and social�socialization of risks, availability of coverage, and reasonableness of price. Socialization of risk extends security on a broad basis, at least in the areas of workers� compensation and national health insurance. A more limited goal is ready availability of coverage. That is, even when persons are not under legal compulsion to purchase insurance, to the extent that they desire to do so, coverage should be available to cover their basic needs. Recently, increasing emphasis has also been placed on the affordability of coverage; not only should coverage be readily available to all who desire it but the price charged for that coverage also should not exceed what the buyer can afford to pay. Implementing this concept necessitates subsidies from some source and may very well conflict with the goal of reasonable price in relation to costs for those policyowners paying the subsidy. Therefore the extent to which this objective will ultimately be realized is not yet determined.