Without a reasonable degree of implementation of the objectives internal to the insurance system, the insurance business would not function in an acceptable manner. In addition, pressing upon the insurance enterprise and the regulation thereof are the external goals of society at large arising from the relationship between the insurance business and the broader political, economic and social environment in which the business functions. These include the following.

One set of external goals stems from public policies derived from political structures and attitudes such as liberty, democracy and federalism. The most visible is federalism which has been a basic tenet and objective in this nation’s political philosophy.

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 has supported the primacy of state control.

The second set of external goals impacting the insurance system is derived from economic and social policy.

To the extent that society perceives insurance as a replacement of prior social institutions, such as the family unit, as a means to obtain security, pressures on insurance regulation can be and promise to continue to be profound. If insurance

Workers’ compensation, compulsory no-fault automobile insurance and national health insurance reflect both past acceptance and continuing pressure for obtaining security for widespread segments of the population through the insurance mechanism.

More limited than the concept of socialization of risk is the concept of availability. That is, even when a person is not under legal compulsion to purchase insurance, to the extent that he or she desires to do so, coverage should be available at least to cover basic needs. Ready availability of or access to insurance coverage has significant economic and social value. Lack of availability may arise in a variety of contexts, for example, restrictive underwriting, cancellations or nonrenewal of policies, and insurer failure to open or keep open-marketing outlets in various areas. Increasingly the government is expected to strengthen or replace the private insurance mechanism when insurance coverage is not readily available. In short, ready availability of adequate coverage in certain lines of insurance has emerged as a fundamental objective of insurance regulation.

As used earlier, the term reasonable price was defined in relation to the cost of the product and the value received. Market systems use higher prices as the means to compensate for higher risks. However, market prices limit access to insurance coverages to those who can afford the market price. More recently, increasing emphasis has been placed on the affordability of coverage. In other words, not only should those coverages considered social insurance be readily available to all desiring it, the price charged should not exceed that which the buyer can afford to pay. Implementation of this concept necessitates subsidies from some source and may very well conflict with the goal of reasonable price in relation to costs for those policyholders paying the subsidy. Although the goal of affordable price has found its way into insurance regulation, the degree to which this objective will ultimately be extended has not yet been determined.

Reflecting this nation’s general acceptance of competition as the appropriate driving principle in the American economy, freedom of access to the market for new entrepreneurs, or existing entrepreneurs entering new markets, is regarded as a value of considerable importance. Consequently insurance regulation typically establishes only general standards for admission to the market. New insurers may enter the market with relative ease unlike those regulated situations where the "needs" test is applied.

Although not all-inclusive, the above summary encompasses a substantial portion of the major insurance regulatory goals. However, two caveats should be noted. First, these goals do not comprise a completely logical and internally consistent set of objectives. The ever-present conflict between goals presents on-going tension necessitating balanced compromises. For example, downward pressure on rates to achieve affordable prices may work contrary to the goal of financial solidity of an insurer. The goal of reasonable price in relation to costs conflicts with the objective of socialization of risks. Second, the goals of insurance regulation are not carved in stone. They can and do evolve and change over time.