What is the primary purpose of insurance regulation?

The primary purpose of insurance regulation is to protect consumers and ensure a stable insurance market. This regulation serves multiple functions, primarily focusing on safeguarding the interests of policyholders. It helps ensure that insurers are financially sound and capable of meeting their obligations to policyholders at the time of claims. By implementing standards for financial solvency, the regulation reduces the risk of insurers failing to pay claims, which would significantly impact consumers and the overall market.

Moreover, regulation fosters a stable insurance environment by promoting ethical practices and transparency within the industry. This stability is crucial for maintaining public trust in insurance products, encouraging consumers to purchase coverage and reducing the likelihood of market disruptions. Therefore, effective insurance regulation directly contributes to consumer protection and market stability, making it essential for the functioning of the insurance industry.