Kochenburger, Peter; Salve, Patrick --- "An Introduction to Insurance Regulation" [2012] ELECD 164; in Burling, Julian; Lazarus, Kevin (eds), "Research Handbook on International Insurance Law and Regulation" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on International Insurance Law and Regulation

Editor(s): Burling, Julian; Lazarus, Kevin

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849807883

Section: Chapter 10

Section Title: An Introduction to Insurance Regulation

Author(s): Kochenburger, Peter; Salve, Patrick

Number of pages: 30

Extract:

10 An introduction to insurance regulation
Peter Kochenburger and Patrick Salve1



1. COMMON CONCERNS IN INSURANCE REGULATION
Insurance is a contract based upon money for a promise. The policyholder's premium is
consideration for the insurer's agreement to pay a covered claim that may occur months,
years or even decades in the future and where the amount of the claim is likely to be
significantly greater than the premium collected. Once the premium is paid, the policy-
holder is dependent on the insurer's ongoing ability and willingness to pay the claim should
an insured loss occur as it cannot contract with another insurer to cover a known loss.2
While other financial products present related solvency and consumer protection concerns,
these central features of the insurance relationship provide unique challenges to govern-
ment regulators in ensuring that policyholders obtain their benefit of the insurance
bargain.3
Insurance policies sold to individuals4 are virtually all `contracts of adhesion', as are
most of the insurance contracts purchased by commercial and public entities. Adhesion
contracts are characterized by the use of standard form agreements drafted exclusively by
one party and for which there is little or no bargaining over terms other than price; the
discretion or choice is whether to agree to the contract as written or forgo it altogether.5
Adhesion contracts are universal in most consumer agreements including insurance,
credit cards, residential mortgage transactions, and individually-purchased software
agreements. The typically lengthy and complex structure of such contracts virtually
...