The impact of an economic loss falls on three categories of persons. At the first instance it falls on the individual who suffers the loss. Further, the individual causing the loss due to his negligence or unlawful conduct is liable to make good or compensate the loss to the aggrieved party. Lastly different statutes impose or fix the burden of certain losses on designated parties even without any lapses on their part, such as employers under the Workmen’s Compensation Act and so on.
Insurance is a legal device to spread the risk of loss among a large number of people and make development possible. The insurance companies form a common pool with the premium paid on behalf of the covered or insured at specified intervals. In any event the premium is not refundable even if the covered does not suffer any loss. In case of actual loss, the insurance company recoups the damage to the insured out of the said accumulated fund. Thus in exchange of a small premium the covered or insured person protects himself from the consequences of a massive loss that might visit him.
Earlier there was no federal law on insurance sector. In 1944 the Supreme Court held that the Congress could regulate inter state insurance transactions. In the wake of such ruling, the Congress enacted the MacCaran- Ferguson Act, which provided for the regulation of the insurance sector by the states. However, the Sherman Act and the Federal Trade Commission Act holds good to the insurance sector only to the extent not governed by the state Acts. In fact the state insurance laws prevail over most of the federal statutes except federal tax laws.
