As a rule, four key reasons for an insurance company to be regulated are provided. According to Rejda, an insurance company requires state regulation because of the responsibility of the state bodies to protect citizens. As Rejda states, the coordination of insurance companies’ activities is carried out in order to facilitate the insurer’s solvency, provide refunds for the customer in case of inadequate services provision, make sure that reasonable rates have been created and that the and make insurance and insurance-related services available to every single citizen of the state. Thus, customers obtain the protection that they need, whereas the companies get rid of the competitors that use unfair practices.
State regulation of insurance companies and their activities is obviously a positive phenomenon, which eliminates the possibility for a company to cheat on its clients. Nevertheless, it should be noted that state regulation of insurance companies has sparked a number of controversies, the key one being the possibility for the state authorities to abuse their power and affect the performance of the companies.