What You need to Know about the Gramm-Leach-Bliley Financial Modernization Act

Toward the end of the last millennia, the banking trends throughout the industry had been in motion for several decades. Banks number of banks across the US had fallen considerably and the banks that remained had grown in size and financial power. There had been 14,000 banks in 1984 but the number dropped to 9,000 by 1999. This was part of an ongoing effort toward greater consolidation that was moving the financial services business in a new direction.

Furthermore, many of the financial services that had been separated during the second half of the century had suddenly become integrated and this included insurance, commercial and investment banking as well. By the start of the 80s, many of the commercial financial services had begun expanding into the underwriting securities as well. Some of them even began to sell insurance.

By 1999, financial integration was an established practice and Congress decided it was time to act. Bill Clinton signed the Gramm-Leach-Bliley Act at the end of 1999. The Act was named so in honor of the three congressmen that supported the act to approval. This had also been called the Financial Modernization Act would change how the financial sector operated and gave the Federal government special supervisory power.

The GLBA was intended to promote the various advantages of integration in the financial sector for investors and consumers. While still looking to safeguard the stability of the banking and financial system as a whole.

One of the biggest changes the Act introduced was the FHC or Financial Holding Company. This is essentially an umbrella organization that can manage its own subsidiaries in various financial activities. This was considered the happy medium where banks still have certain financial activities restricted but can opt to be a part of a larger organization that is involved in these activities.

The Role Of The Government Accountability Office (GAO)

The Government Accountability Office or GAO is the watchdog for the United States federal government. This is an independent agency which helps ensure the elected members and staff of the U.S. Congress comply with all rules and regulations. The GAO audits, investigates and evaluates how the federal government spends taxpayer dollars. The GAO’s mission is to support Congress and help ensure it is meeting all constitutional responsibilities. The GAO also provides advice and recommendations on how Congress can improve and investigates when there is a possibility that federal funds were mishandled or abused.

The Comptroller General of the United States is the head of the GAO. The agency was established as the General Accounting Office in 1921 under the Budget and Accounting Act which was passed by Congress. This act requires investigation into receipt, disbursement or use of public or federal funds when requested. The agency will then make recommendations to both the Congress and the President of the United States which are designed to improve the expenditure of federal dollars.

In 2004, the name of the agency was changed to the Government Accountability Office under the GAO Human Capital Reform Act. The new name better reflected the mission of the agency.

Many refer to the GAO as the taxpayer’s best friend. It is also known as the Congressional Watchdog. The agency gets these nicknames because it frequently audits and investigates how our federal funds are used and often uncovers inefficiency and waste in government programs.

The GAO prepares and distributes reports on all audits and investigations. These reports are distributed to members of Congress, the President and to the agency or organization which is the subject of the report like Chandler, Mathis, and Zivley.

Citizens can find copies of most GAO reports on the GAO website. The topics of these reports include Financial Management, Retirement Issues, Homeland Security, and Defense.

What Is The Federal Crime Insurance Program And Does It Still Exist?

The Federal Crime Insurance Program was a program that was created in 1970 by Title VI of the Housing and Urban Development Act, commonly known as HUD. This program was created in order to allow home and business owners the ability to purchase insurance for damages from crimes such as burglary, theft, robbery, and other similar crimes.

The reason for its’ creation was that in certain states with high crime rates, private crime insurance policies were either not available, or were so expensive that most people and businesses were unable to afford them.

The big problem was that most homeowners’ and business insurance packages offered no protection for assets that were taken, or damages inflicted to property, that occurred as the result of a crime. This left many businesses and homeowners’ unable to have any way of recovery after they became the victims of these types of crimes.

Does The Program Still Exist?

The Federal Crime Insurance Program was terminated on September 30, 1982 because it was costing the federal government millions of dollars in insurance losses. From September 30, 1980 to September 30, 1981, the program cost the government $33.7 million dollars.

As you can imagine, this was a program that was simply unfeasible to be maintained as it was resulting in far too high of a cost, and many individual states had begun offering programs and incentives that helped to protect homeowners’ and businesses from damages resulting from crimes.

The main states that were still benefiting from The Federal Crime Insurance Program at the time of its’ closure were New York, Pennsylvania, and Florida who made up 71% of the total policies issued at the time.

For businesses and homeowners’ who wanted to participate in the program, the last day to apply for it was September 30, 1982.

Understanding the National Flood Insurance Act of 1968

Extensive loss of livelihoods, property and even life led to the creation of the National Flood Insurance Act of 1968. The legislation has received much recent attention due to the extensive damage caused by flooding in Florida and Louisiana as it did in the violent series of floods in the aftermath of Hurricane Betsy in 1965.

According to the foreword in the US Code Title 42 Chapter 50: National Flood Insurance, the US congress found that the dangers and hazards of sporadic flooding was creating a personal and economic strain on many parts of the US. It was also mentioned that the physical preventative measures, such as dams and embankments, may not always be sufficient to hold back the flood waters and avoid damage.

For these reasons the Federal Government has decided to participate in the National Flood Insurance Program that was hitherto being addressed on the private sector alone. The US Code also mentions some other reasons that would make it “uneconomic” to stay out of the flood insurance program within reasonable terms and conditions.

This piece of legislation in 1968 was the first-time flood insurance was made available on such a massive scale almost available to everyone. Soon after the Flood Disaster Protection Act of 1973 made it mandatory for all people living in Special Flood Hazard Areas to purchase flood insurance to avoid against personal injury lawsuits.

Several important acts followed the National Flood Insurance Act of 1968, besides the Flood Disaster Protection Act of 1973. The most important is the Homeowner Flood Insurance Affordability Act of 2014. The law was meant to ensure that flood insurance premiums were precisely reflecting the risk of flood damage. The result was an increase in premiums that increased the debt of the National Flood Insurance Program.

This act is one of the first times that the federal government became involved with the insurance industry which is usually left for the state government to regulate and monitor.

What is the McCarran – Ferguson Act?

The McCarran Ferguson Act is a law that makes the insurance industry exempt from most federal regulations including some (but not all ) of the antitrust laws. The Act was passed in 1945 after the Supreme Court ruled that the federal government was permitted to regulate insurance companies under the Commerce Clause of the Constitution. This ruling came as a part of the United States vs South-Eastern Underwriters’ Association case.

Senators Pat McCarran and Homer Ferguson sponsored the act, which provides that ‘Acts of Congress’ which are not expressly aimed at the regulation of the insurance industry will not over-rule laws or regulations that are intended to regulate the business of insurance.

The McCarran-Ferguson act still applies today, and it remains an important one. Indeed, one of the recent proposals for healthcare reform made by the Republicans may require the McCarran-Ferguson Act to be modified. In February 2010, the House of Representatives voted in favour of repealing the Act in terms of how it applies to health insurance, but other types of insurance are still covered.

The act protects certain state laws regarding insurance and allows each state to regulate the insurance industry, including establishing their own licensing requirements for insurance. It also exempts insurance companies from federal anti-trust legislation, at least in part, and protects the insurance industry from a federal take-over. It is widely felt that insurance is one of the most regulated industries in the USA, and insurance companies were concerned about the possibility of even more regulation from the federal government, on top of what the individual states were already doing. State insurance regulators were concerned about the outcome of the South Eastern Underwriters’ Association case, and while Attorney General Biddle denied that the government had any intent of increasing regulation, the McCarran-Ferguson Act of 1945 helped to offset those concerns.

The Supreme Court Case: United States vs South Eastern Underwriters Association Explained

The  Supreme Court case United States vs the South-Eastern Underwriters Association is known because the outcome inspired the McCarran-Ferguson Act, which gave Congress the power to help regulate the Insurance industry.

The case took place in 1942. The Attorney General of Missouri requested the case because the insurance regulators in Missouri felt that they were not able to correct abuses that had been taking place since the 1920s. The Department of Justice investigated the case, and a grand jury then indicted the South-Eastern Underwriters Association, as well as many of their officers and member companies. The defendants were charged with two counts of antitrust violations as well as conspiracy to fix premium rates for fire insurance policies, boycotting independent sales agencies that did not comply. They were also charged with monopolizing markets in several states.

The district court dismissed the indictment, noting that the business of insurance is not commerce and that while it might be considered trade that is subject to local laws, the commerce clause is not to be relied upon.

The question that the Court formulated for the case was whether or not the Commerce Clause gave Congress the power to regulate insurance companies (from health insurance, to social security and disability insurance, to homeowners and life insurance) doing trade across state lines. The Supreme Court had, for the last 80 years, held the belief that insurance is not a commerce transaction, and this is what the case tested. The case in the Supreme Court ruled that the Sherman Act was intended to cover monopolization and that the sales of insurance was indeed a form of commerce that Congress could regulate.

In response to this, the McCarran-Ferguson Act was passed in 1945, giving formal protection to states to allow them to regulate their own insurance transactions, and limiting the way that insurance could be regulated on a federal level. The act still stands now, although it could be modified to change how health care insurance is treated.

What Is A Risk Retention Group?

Risk is an important factor to consider for institutions and companies who are investing in future growth. This is where RRGs come into action as a good option. Risk Retention Groups are designed to help keep things in place for businesses who want to maximize their insurance.

Let’s take a look at what a Risk Retention Group is.

What Is It?

The primary focus of Risk Retention Groups is to help prevent liabilities from swallowing up an entire institution. For example, if a problem occurs and a liability presents itself, this group is going to cover for those concerns. The difference between this and regular insurance is knowing everything is unbundled (pick and choose what you need), and it is controlled by various members.

This ensures the protection is kept to the point and doesn’t block what you are doing.

Benefits of A Risk Retention Group

1) Stable

This is a stable option that is going to keep the risk at bay for all members who are a part of the group. This stability keeps everyone comfortable and ensures liabilities don’t sweep everything away in the long-term.

2) Member Control Over Risk

What is the most important thing for people who are venturing down this path? The goal is to maintain risk as that is the only way to feel comfortable. All members can control risk with RRGs on their side.

3) Avoid Multiple State Regulations

The goal is to keep things simple as that’s most important. You can avoid multiple state regulations by making sure the Risk Retention Group keeps things in place. It will have an all-encompassing solution for your needs.

A Risk Retention Group is a good idea for those wanting to regulate what they’re doing and how their liabilities are handled.

Information On Unfair Claims Settlement Act

Imagine running a business and all of a sudden it is flooded.

You will be running around looking to have things repaired, and that’s normal. However, if the loss is too great, you will want to make a claim to your insurance agency based on the plan that was signed in advance.

Now, what if the insurance agency starts using delay tactics by stating they lost their forms or misplaced things? What if you are in need of the funds right away? What will happen then?

Your Albany lawyers should tell you that this is where the Unfair Claims Settlement Act comes into action as a solution.

Let’s take a look at what this act involves.

Purpose of Act

The primary objective of the Act is to protect individuals and businesses from insurance agencies who don’t work in good faith.

If the court deems their behavior abnormal or based around delay tactics, this act is invoked, and an immediate verdict is sent through to speed up the process.

Benefits of Act

1) Speeds Up Process

The purpose of using this act in the court of law is to ensure the process is sped up. There is nothing worse than having a flooded business or a fire go through without having funds to start repair work.

It leads to significant losses that are hard to recover in the short or long-term.

2) Protects Against Shady Insurers

A major benefit is knowing shady insurers will not be able to scheme their way out of making a payment based on the agreement that was signed. This is important for those who are dealing with an accident and need the funds as soon as possible.

The Unfair Claims Settlement Act is one of those policies that are required to ensure things are managed safely for all parties.

Summary Of Paul v. Virginia In 1869

In 1868, the U.S. Supreme Court ruled that states could regulate insurance sales and issuance. The deciding factor, according to the Court was that insurance sales were not interstate commerce. This case was brought by the National Board of Fire Underwriters. The purpose of the case was to challenge the states’ ability to regulate insurance sales.

In the 19th century, life and fire insurance companies began marketing products nationally. In an effort to encourage local enterprise, states began levying license fees and taxes on insurance companies that were not based in the state. This type of legislation was mostly focused on the large insurance companies headquartered in the Northeast United States.

Paul v. Virginia became a landmark case for states’ rights. Paul was an insurance agent for several New York state fire insurance companies. He was selling insurance in Virginia and was convicted for selling insurance without a license under Virginia law.

Paul lived in Virginia and was a resident of the Commonwealth. He was appointed to sell insurance against fire by several New York insurance companies. He applied for a license with the state, but did not deposit bonds with the state treasurer and was refused the license.

The insurance company lawyers argued that their corporations should be considered citizens and be covered under Article IV and the Privileges and Immunities Clause. The ruling by the Supreme Court denied this argument and found that corporations were not citizens as defined by this clause.

In a later 1944 ruling in United States v. Southeastern Underwriters Association, the court found that insurance was interstate commerce, however by this time state regulatory systems were well-defined. Congress strengthened the states’ positions in 1945 when they authorized the McCarran-Ferguson Act and recognized state insurance regulation.

This ruling also held that the federal government could regulate insurance transactions under the Commerce Clause. To date, this ruling has not been reversed.

About The National Association Of Insurance Commissioners

If you are wondering about the National Association Of Insurance Commissioners (NAIC), you should know that it is an organization composed of the 50 different insurance commissioners in the United States.

Insurance as we know it is a regulated industry, what most people do not know is that each state has an insurance commissioner that oversees the conduct of insurance companies in each state. The NAIC provides support for the state insurance commissioners.

The NAIC itself provides guidelines on the best practices in the industry as well as regulations. Each state, however, is free to modify the implementation of the regulations and guidelines. For the most part, though, the laws governing the industry are pretty standard no matter what the state, although it’s fair to assume there might be differences in the regulations with regard to different insurance products. The main idea behind the NAIC, though, is to provide uniformity in all 50 states so it would be easy for the different insurance companies including family insurance to comply with the law.

What this means is that if you are someone who is looking for an insurance product, any type of insurance product, it is important to take note of the different insurance regulations that are in effect in your state. You might just find that there are slight nuances between the regulations in your state and the rest of the country.

The NAIC is an old organization that was formed in 1871. It was first called the National Convention of Insurance Commissioners, after which it was known as the NAIC. The organization has continued to provide support for the national insurance industry.

If you want to know more about what the national gathering of insurance commissioners do, you can find more information on its official website, or watch the video below: