What is the primary purpose of insurance regulation?

The primary purpose of insurance regulation is to protect consumers and ensure market stability. This is essential because insurance is a service that involves the transfer of risk, and consumers depend on insurers to provide financial security in times of need. Regulation helps to establish a framework within which insurers must operate, ensuring that they remain solvent and capable of fulfilling their commitments to policyholders.

Additionally, by promoting fair competition and preventing fraudulent practices, regulation safeguards the interests of consumers, ensuring they have access to trustworthy and reliable insurance products. This regulatory oversight also helps maintain public confidence in the insurance sector, which is crucial for the overall stability of the financial system and the economy as a whole. Effective regulation encourages responsible business practices among insurers, fostering an environment where consumers are treated fairly and financial security is strengthened.