Commissioner’s Desk Why are you regulated by Frankfort and not Washington DC?

The insurance industry was founded in the United States—with the help of Benjamin Franklin—in 1752. The current state insurance regulatory framework dates to New Hampshire appointing the first insurance commissioner in 1851. Kentucky’s first commissioner was appointed in 1870, perhaps after the US Supreme Court ruled in Paul v. Commonwealth of Virginia that “issuing a policy of insurance is not a transaction of commerce”, thus giving the states the responsibility of market regulation and taxation of insurance.

The states’ need to discuss issues of common concern led to the formation of the National Insurance Convention in 1871, known today as National Association of Insurance Commissioners (NAIC). Insurance regulators’ responsibilities grew in scope and complexity as the industry evolved. As the industry evolved regulation required change. This sparked the Supreme Court case United States v. Southeastern Underwriters, leading to the overturning of the court’s previous decision in Paul v. Commonwealth of Virginia. This led to a void of both state and federal regulation, causing turmoil and uncertainty.

In response, Congress quickly enacted the McCarranFerguson Act of 1945 which codified that the states should continue to regulate and tax the business of insurance. The McCarran-Ferguson Act also affirmed that state regulation of the insurance industry was in the best interest of the public. The Financial Services Modernization Act of 1999, also known as the GrammLeach-Bliley Act (GLBA), established comprehensive regulatory framework permitting those affiliations among banks, securities firms, and insurance companies should be regulated by the states. Insurance is best regulated at the state level. Not only does this benefit the public, but it also benefits you as the producer. Frankfort is here to serve you.