Statutes and Regulations? I’m not an attorney so what do they mean?


When I first started working in insurance compliance and had no prior legal experience (how did I get the job then; a story for another time), people would talk about “statutes.” Then the next sentence would be about “regulations.” I asked myself, what is a statute anyway? And how do they differ from regulations.

Statutes are written laws passed by legislative bodies; a state or federal Senate, and house of representatives. A statute describes something by which people have to abide; it’s the law. It is a formal written enactment of a legislative authority that governs a city, state, or country. That is fancy talk for it being a command to do, or prohibit something. For example, in most states, a producer has to renew his/her insurance license (if not perpetual) to continue to legally sell insurance products. The statute would indicate when the license has to be renewed (for example, biennially), a fee that must be paid, and what would happen if the license is not renewed by the renewal date (license lapses, for instance).

law-statutesRegulations are guidelines for complying with the statute, written by the governmental agency responsible for its implementation. In the insurance industry, a statute having to do with insurance is administered by the state’s Department of Insurance (DOI). It is the Commissioner’s (head of the DOI) responsibility to see that procedures are established for everyone to follow in order to comply.

How does something become a statute? It is not as simple a process as I once thought. Again, back in my days of not understanding the legal process, I thought the Commissioner just decided one day to make something a requirement. Guess again! Nothing could be that simple, especially when we are speaking of the legal system.

A statute begins as a bill, proposed and sponsored by a legislator, either in the state or federal House of Representatives or senate. The key word here is “proposed.” Just because it is proposed as a statute doesn’t mean it will be voted into law. If fortunate, it will be discussed among the legislative body, possibly go to a committee for further discussion, back to the legislature, and then voted on. If approved by that legislative body that initiated the bill, it is then moved to the other legislative body to go through the same process as above and voted upon as well. If the house and senate get the number of votes required for it to pass, it is then signed into law by either the governor, if it is a state statute, or the president, if it is a federal statute.

Here is a term to remember and use at a party to impress. Sine Die (pronounced saɪni ˈdaɪi). It means when Congress adjourns and the date to reconvene is not specified. If a legislator has what s/he thinks is an important bill with a specific timeline, and needs to reintroduce it because it wasn’t voted on in the last session, and the legislative body adjourns “sine die,” then the reintroduction of that bill and its enactment could be in jeopardy.

Now that we understand better the difference between a statute and regulation, let’s talk about why they are an important part of running an insurance business as an insurer, producer, or agency.

Stay tuned for my blog: Creating Policies and Procedures to Comply with Statutes and Regulations.


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