Regulation of Insurance

MR. WATSON: Just a thought! What's the minimum age to buy insurance?

STUDENT: 15.

MR. WATSON: Anyone over age 15 will be required to sign on the application. It is what it is.

 

Paul vs. Virginia (Supreme Court Case) State regulated

MR. WATSON: In 1868, (snoring, pretending to fall asleep) there was a U.S. Supreme court case called Paul versus Virginia. And we're not talking about some lady named Virginia. We're talking about the state of Virginia. There was a problem with the regulation of insurance, who and where it was going to be regulated. The State of Virginia or the Feds. They had some problems. They went to the Supreme Court, and the Supreme Court ruled it was state-regulated. So in 1868 the Supreme Court ruled it was what?

STUDENTS: State-regulated.

MR. WATSON: When did World War II end?

STUDENTS: 1945.

MR. WATSON: The year before that was

STUDENTS: 1944.

 

U.S. vs. Southeastern Underwriters Association (Supreme Court Case) Federally regulated

MR. WATSON: Very good! In 1944 this problem went to the Supreme Court again, and the Supreme Court ruled it was federally regulated. This was the U.S. vs. Southeastern Underwriters Association. So, everybody was now just confused. They didn't know what happened or what to think. So Congress passed something the next year -- what year was that? 19__what? 45. 1945.

 

McCarran-Ferguson Act***** Know this!!! State regulated

MR. WATSON: In 1945 congress passed the McCarran-Ferguson Act . And that act gave regulation back to the States. To this day, insurance is state regulated. Each state determines it's own laws regarding insurance.

MR. WATSON: State, federal, then state again. You all agree?

STUDENTS: Yes.

 

But what about variable products?

MR. WATSON: If you ever see the word variable, which you will, that means it is dually regulated by the state and the feds. And that branch of the federal government is called the Securities and Exchange Commission. It's real easy. So who regulates universal life?

STUDENTS: State and federal.

MR. WATSON: Heck, no!! Did I say "variable"?

STUDENTS: No.

MR. WATSON: I didn't say "variable." So who regulates universal life?

STUDENTS: State.

MR. WATSON: Who regulates variable universal life?

STUDENTS: State and federal.

MR. WATSON: You understand? So you always say what first?

STUDENTS: State.

MR. WATSON: So, variable universal life, state and feds. So you always say "state" and decide whether you need to add "feds." And SEC does not stand for Southeastern Conference. It stands for Securities and Exchange Commission. There are two licenses needed to sell variable products. The state's and something called FINRA (a Series 6 or 7, registered representative). This will be further explained in another chapter.