Does every state need its own Department of Insurance?
Insurance is a slightly nonstandard business in that all the major regulatory functions are left to the individual US states. Federal government has decided to abandon its normal role as the regulator of business to protect the consumers’ rights. Such regulation as does exist is down to the political climate in each state and the will of the lawmakers to take on the economic power of the insurance industry. That said, all Departments of Insurance start off equal. Their primary function is to license companies to sell insurance in their state. Unlike other businesses, an insurance company is licensed state-by-state. No company can sell a policy across state lines. That means every national insurer must establish separate subsidiaries in each state and each company must hold a license. There are also minimum capital holdings set by the Department to protect the solvency of the local companies. There must always be enough money held by each company to pay out on the claims made. Some states require actual cash to be available. Others have a formula to prove the availability of money as required. But, for the most part, this is historical. The major players established their presence in multiple states years ago and newcomers moving across state lines are rare. In fact, the general lack of competition in state markets gives no incentive for companies to seek new licenses. [...]