Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Principles[link]

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Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.^[1]

Insurability[link]

Risk which can be insured by private companies typically share seven common characteristics:^[2]

1. Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates.
2. Definite loss: The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
3. Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable.
4. Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer.
5. Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that the insurance will be purchased, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the US Financial Accounting Standards Board standard number 113)
6. Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
7. Limited risk of catastrophically large losses: Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as well as wind insurance in hurricane zones. In the US, flood risk is insured by the federal government. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

Legal[link]

When a company insures an individual entity, there are basic legal requirements. Several commonly cited legal principles of insurance include:^[3]

1. Indemnity – the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insured's interest.
2. Insurable interest – the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved. The concept requires that the insured have a "stake" in the loss or damage to the life or property insured. What that "stake" is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons.
3. Utmost good faith – the insured and the insurer are bound by a good faith bond of honesty and fairness. Material facts must be disclosed.
4. Contribution – insurers which have similar obligations to the insured contribute in the indemnification, according to some method.
5. Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for insured's loss.
6. Causa proxima, or proximate cause – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be excluded
7. Mitigation - In case of any loss or casualty, the asset owner must attempt to keep the loss to a minimum, as if the asset was not insured.

Indemnification[link]

To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally two types of insurance contracts that seek to indemnify an insured:

1. an "indemnity" policy, and
2. a "pay on behalf" or "on behalf of"^[4] policy.

The difference is significant on paper, but rarely material in practice.

An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000).^[4][5]

Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner in the above example) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language.^[4]

An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance policy. Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy.

When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims — in theory for a relatively few claimants — and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.

Effects[link]

Insurance can have various effects on society through the way that it changes who bears the cost of losses and damage. On one hand it can increase fraud, on the other it can help societies and individuals prepare for catastrophes and mitigate the effects of catastrophes on both households and societies.

Insurance can influence the probability of losses through moral hazard, insurance fraud, and preventive steps by the insurance company. Insurance scholars have typically used morale hazard to refer to the increased loss due to unintentional carelessness and moral hazard to refer to increased risk due to intentional carelessness or indifference.^[6] Insurers attempt to address carelessness through inspections, policy provisions requiring certain types of maintenance, and possible discounts for loss mitigation efforts. While in theory insurers could encourage investment in loss reduction, some commentators have argued that in practice insurers had historically not aggressively pursued loss control measures - particularly to prevent disaster losses such as hurricanes - because of concerns over rate reductions and legal battles. However, since about 1996 insurers began to take a more active role in loss mitigation, such as through building codes.^[7]

Insurers' business model[link]

Underwriting and investing[link]

The business model is to collect more in premium and investment income than is paid out in losses, and to also offer a competitive price which consumers will accept. Profit can be reduced to a simple equation:

Profit = earned premium + investment income - incurred loss - underwriting expenses.

Insurers make money in two ways:

1. Through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks;
2. By investing the premiums they collect from insured parties.

The most complicated aspect of the insurance business is the actuarial science of ratemaking (price-setting) of policies, which uses statistics and probability to approximate the rate of future claims based on a given risk. After producing rates, the insurer will use discretion to reject or accept risks through the underwriting process.

At the most basic level, initial ratemaking involves looking at the frequency and severity of insured perils and the expected average payout resulting from these perils. Thereafter an insurance company will collect historical loss data, bring the loss data to present value, and compare these prior losses to the premium collected in order to assess rate adequacy.^[8] Loss ratios and expense loads are also used. Rating for different risk characteristics involves at the most basic level comparing the losses with "loss relativities" - a policy with twice as many losses would therefore be charged twice as much. More complex multivariate analyses are sometimes used when multiple characteristics are involved and a univariate analysis could produce confounded results. Other statistical methods may be used in assessing the probability of future losses.

Upon termination of a given policy, the amount of premium collected and the investment gains thereon, minus the amount paid out in claims, is the insurer's underwriting profit on that policy. Underwriting performance is measured by something called the "combined ratio"^[9] which is the ratio of expenses/losses to premiums. A combined ratio of less than 100 percent indicates an underwriting profit, while anything over 100 indicates an underwriting loss. A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings.

Insurance companies earn investment profits on "float". Float, or available reserve, is the amount of money on hand at any given moment that an insurer has collected in insurance premiums but has not paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest or other income on them until claims are paid out. The Association of British Insurers (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange.^[10]

In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held.

Naturally, the float method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards, so a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the underwriting, or insurance, cycle.^[11]

Claims[link]

Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid for. Claims may be filed by insureds directly with the insurer or through brokers or agents. The insurer may require that the claim be filed on its own proprietary forms, or may accept claims on a standard industry form, such as those produced by ACORD.

Insurance company claims departments employ a large number of claims adjusters supported by a staff of records management and data entry clerks. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. The adjuster undertakes an investigation of each claim, usually in close cooperation with the insured, determines if coverage is available under the terms of the insurance contract, and if so, the reasonable monetary value of the claim, and authorizes payment.

The policyholder may hire their own public adjuster to negotiate the settlement with the insurance company on their behalf. For policies that are complicated, where claims may be complex, the insured may take out a separate insurance policy add on, called loss recovery insurance, which covers the cost of a public adjuster in the case of a claim.

Adjusting liability insurance claims is particularly difficult because there is a third party involved, the plaintiff, who is under no contractual obligation to cooperate with the insurer and may in fact regard the insurer as a deep pocket. The adjuster must obtain legal counsel for the insured (either inside "house" counsel or outside "panel" counsel), monitor litigation that may take years to complete, and appear in person or over the telephone with settlement authority at a mandatory settlement conference when requested by the judge.

If a claims adjuster suspects under-insurance, the condition of average may come into play to limit the insurance company's exposure.

In managing the claims handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome. Disputes between insurers and insureds over the validity of claims or claims handling practices occasionally escalate into litigation (see insurance bad faith).

Marketing[link]

Insurers will often use insurance agents to initially market or underwrite their customers. Agents can be captive, meaning they write only for one company, or independent, meaning that they can issue policies from several companies. The existence and success of companies using insurance agents is likely due to improved and personalized service.^[12]

History of insurance[link]

In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: natural or non-monetary economies (using barter and trade with no centralized nor standardized set of financial instruments) and more modern monetary economies (with markets, currency, financial instruments and so on). The former is more primitive and the insurance in such economies entails agreements of mutual aid. If one family's house is destroyed the neighbours are committed to help rebuild. Granaries housed another primitive form of insurance to indemnify against famines. Often informal or formally intrinsic to local religious customs, this type of insurance has survived to the present day in some countries where a modern money economy with its financial instruments is not widespread.^{[citation needed]}

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.^[13] Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The subscription room at Lloyd's of London in the early 19th century.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."^[14]

A thousand years later, the inhabitants of Rhodes invented the concept of the general average. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were deliberately jettisoned in order to lighten the ship and save it from total loss.

The ancient Athenian "maritime loan" advanced money for voyages with repayment being cancelled if the ship was lost. In the 4th century BC, rates for the loans differed according to safe or dangerous times of year, implying an intuitive pricing of risk with an effect similar to insurance.^[15] The Greeks and Romans introduced the origins of health and life insurance c. 600 BCE when they created guilds called "benevolent societies" which cared for the families of deceased members, as well as paying funeral expenses of members. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Lloyd's of London, pictured in 1991, is one of the world's leading and most famous insurance markets

Some forms of insurance had developed in London by the early decades of the 17th century. For example, the will of the English colonist Robert Hayman mentions two "policies of insurance" taken out with the diocesan Chancellor of London, Arthur Duck. Of the value of £100 each, one relates to the safe arrival of Hayman's ship in Guyana and the other is in regard to "one hundred pounds assured by the said Doctor Arthur Ducke on my life". Hayman's will was signed and sealed on 17 November 1628 but not proved until 1633.^[16] Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is an insurance market rather than a company) for marine and other specialist types of insurance, but it operates rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667."^[17] A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon's Insurance Office.^[18]

The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.^[19] Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses.

In the United States, regulation of the insurance industry primary resides with individual state insurance departments. The current state insurance regulatory framework has its roots in the 19th century, when New Hampshire appointed the first insurance commissioner in 1851.^[19] Congress adopted the McCarran-Ferguson Act in 1945, which declared that states should regulate the business of insurance and to affirm that the continued regulation of the insurance industry by the states is in the public's best interest.^[19] The Financial Modernization Act of 1999, commonly referred to as "Gramm-Leach-Bliley", established a comprehensive framework to authorize affiliations between banks, securities firms, and insurers, and once again acknowledged that states should regulate insurance.^[19]

Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through the National Association of Insurance Commissioners. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for insurance similar to the banking industry.

In 2010, the federal Dodd-Frank Wall Street Reform and Consumer Protection Act established the Federal Insurance Office ("FIO").^[20] FIO is part of the U.S. Department of the Treasury and it monitors all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that may contribute to a systemic crisis in the insurance industry or in the U.S. financial system.^[20] FIO coordinates and develops federal policy on prudential aspects of international insurance matters, including representing the U.S. in the International Association of Insurance Supervisors.^[20] FIO also assists the U.S. Secretary of Treasury with negotiating (with the U.S. Trade Representative) certain international agreements.^[20]

Moreover, FIO monitors access to affordable insurance by traditionally underserved communities and consumers, minorities, and low- and moderate-income persons.^[20] The Office also assists the U.S. Secretary of the Treasury with administering the Terrorism Risk Insurance Program.^[20] However, FIO is not a regulator or supervisor.^[20] The regulation of insurance continues to reside with the states.^[20]

Types of insurance[link]

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy in the US typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.

Business insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the business owner's policy (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs.^[21]

Auto insurance[link]

A wrecked vehicle in Copenhagen

Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision.

Coverage typically includes:

1. Property coverage, for damage to or theft of the car;
2. Liability coverage, for the legal responsibility to others for bodily injury or property damage;
3. Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

Most countries, such as the United Kingdom, require drivers to buy some, but not all, of these coverages. When a car is used as collateral for a loan the lender usually requires specific coverage.

Gap insurance[link]

Gap insurance covers the excess amount on your auto loan in an instance where your insurance company does not cover the entire loan. Depending on the companies specific policies it might or might not cover the deductible as well. This coverage is marketed for those who put low down payments, have high interest rates on their loans, and those with 60 month or longer terms. Gap insurance is typically offered by your finance company when you first purchase your vehicle. Most auto insurance companies offer this coverage to consumers as well. If you are unsure if GAP coverage had been purchased, you should check your vehicle lease or purchase documentation.

Home insurance[link]

Home insurance provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.^[22]

Health insurance[link]

Great Western Hospital, Swindon

Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance protects policyholders for dental costs. In the US and Canada, dental insurance is often part of an employer's benefits package, along with health insurance.

Accident, sickness and unemployment insurance[link]

Workers' compensation, or employers' liability insurance, is compulsory in some countries

• Disability insurance policies provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgage loans and credit cards. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained only by those with at least six-figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a person for a period typically up to six months, paying a stipend each month to cover medical bills and other necessities.
• Long-term disability insurance covers an individual's expenses for the long term, up until such time as they are considered permanently disabled and thereafter. Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled.
• Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.
• Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
• Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.

Casualty[link]

Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.

• Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
• Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss.

Life[link]

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.

Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.

Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.

In many countries, such as the US and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.

In the US, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation.

Burial insurance[link]

Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral. The Greeks and Romans introduced burial insurance circa 600 AD when they organized guilds called "benevolent societies" which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times.

Property[link]

This tornado damage to an Illinois home would be considered an "Act of God" for insurance purposes

Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below:

US Airways Flight 1549 was written off after ditching into the Hudson River

• Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability. Airports may also appear under this subcategory, including air traffic control and refuelling operations for international airports through to smaller domestic exposures.

• Boiler insurance (also known as boiler and machinery insurance, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.

• Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.^[23]

• Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease.^[24]

• Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high deductible. Rates depend on location and hence the likelihood of an earthquake, as well as the construction of the home.

• Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

Hurricane Katrina caused over $80 billion of storm and flood damage

• Flood insurance protects against property loss due to flooding. Many insurers in the US do not provide flood insurance in some parts of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.

• Home insurance, also commonly called hazard insurance, or homeowners insurance (often abbreviated in the real estate industry as HOI), is the type of property insurance that covers private homes, as outlined above.

• Landlord insurance covers residential and commercial properties which are rented to others. Most homeowners' insurance covers only owner-occupied homes.

Fire aboard MV Hyundai Fortune

• Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.

• Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder's home uninhabitable. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.

• Surety bond insurance is a three-party insurance guaranteeing the performance of the principal.

The demand for terrorism insurance surged after 9/11

• Terrorism insurance provides protection against any loss or damage caused by terrorist activities. In the US in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal Program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).

• Volcano insurance is a specialized insurance protecting against damage arising specifically from volcanic eruptions.

• Windstorm insurance is an insurance covering the damage that can be caused by wind events such as hurricanes.

Liability[link]

Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured.

The subprime mortgage crisis was the source of many liability insurance losses

• Public liability insurance covers a business or organization against claims should its operations injure a member of the public or damage their property in some way.
• Directors and officers liability insurance (D&O) protects an organization (usually a corporation) from costs associated with litigation resulting from errors made by directors and officers for which they are liable.
• Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
• Errors and omissions insurance is business liability insurance for professionals such as insurance agents, real estate agents and brokers, architects, third-party administrators (TPAs) and other business professionals.
• Prize indemnity insurance protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.
• Professional liability insurance, also called professional indemnity insurance (PI), protects insured professionals such as architectural corporations and medical practitioners against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called medical malpractice insurance.

Credit[link]

Credit insurance repays some or all of a loan when certain circumstances arise to the borrower such as unemployment, disability, or death.

• Mortgage insurance insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name "credit insurance" more often is used to refer to policies that cover other kinds of debt.
• Many credit cards offer payment protection plans which are a form of credit insurance.
• Trade credit insurance is business insurance over the accounts receivable of the insured. The policy pays the policy holder for covered accounts receivable if the debtor defaults on payment.

Other types[link]

• All-risk insurance is an insurance that covers a wide-range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.^[25] In car insurance, all-risk policy includes also the damages caused by the own driver.

High-value horses may be insured under a bloodstock policy

• Bloodstock insurance covers individual horses or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.
• Business interruption insurance covers the loss of income, and the expenses incurred, after a covered peril interrupts normal business operations.
• Collateral protection insurance (CPI) insures property (primarily vehicles) held as collateral for loans made by lending institutions.
• Defense Base Act (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada. DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
• Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
• Kidnap and ransom insurance is designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap, extortion, wrongful detention and hijacking.
• Legal expenses insurance covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as "the event". There are two main types of legal expenses insurance: before the event insurance and after the event insurance.
• Locked funds insurance is a little-known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. The terms of this type of insurance are usually very strict. Therefore it is used only in extreme cases where maximum security of funds is required.
• Livestock insurance is a specialist policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
• Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as defamation.
• Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. (See the nuclear exclusion clause and for the US the Price-Anderson Nuclear Industries Indemnity Act.)
• Pet insurance insures pets against accidents and illnesses; some companies cover routine/wellness care and burial, as well.
• Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
• Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.
• Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
• Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.
• Tuition insurance insures students against involuntary withdrawal from cost-intensive educational institutions
• Interest rate insurance protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage

Insurance financing vehicles[link]

• Fraternal insurance is provided on a cooperative basis by fraternal benefit societies or other social organizations.^[26]
• No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.
• Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.
• Retrospectively rated insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.
• Formal self insurance is the deliberate decision to pay for otherwise insurable losses out of one's own money. This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.
• Reinsurance is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. Financial reinsurance is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.
• Social insurance can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that requires participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the welfare state. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):
  • National Insurance
  • Social safety net
  • Social security
  • Social Security debate (United States)
  • Social Security (United States)
  • Social welfare provision
• Stop-loss insurance provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.

Closed community self-insurance[link]

Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts.

In the United Kingdom, The Crown (which, for practical purposes, meant the civil service) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.

Insurance companies[link]

Insurance companies may be classified into two groups:

• Life insurance companies, which sell life insurance, annuities and pensions products.
• Non-life, general, or property/casualty insurance companies, which sell other types of insurance.

General insurance companies can be further divided into these sub categories.

• Standard lines
• Excess lines

In most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.

In the United States, standard line insurance companies are insurers that have received a license or authorization from a state for the purpose of writing specific kinds of insurance in that state, such as automobile insurance or homeowners' insurance.^[27] They are typically referred to as "admitted" insurers. Generally, such an insurance company must submit its rates and policy forms to the state's insurance regulator to receive his or her prior approval, although whether an insurance company must receive prior approval depends upon the kind of insurance being written. Standard line insurance companies usually charge lower premiums than excess line insurers and may sell directly to individual insureds. They are regulated by state laws, which include restrictions on rates and forms, and which aim to protect consumers and the public from unfair or abusive practices.^[27] These insurers also are required to contribute to state guarantee funds, which are used to pay for losses if an insurer becomes insolvent.^[27]

Excess line insurance companies (also known as Excess and Surplus) typically insure risks not covered by the standard lines insurance market, due to a variety of reasons (e.g., new entity or an entity that does not have an adequate loss history, an entity with unique risk characteristics, or an entity that has a loss history that does not fit the underwriting requirements of the standard lines insurance market).^[27] They are typically referred to as non-admitted or unlicensed insurers.^[27] Non-admitted insurers are generally not licensed or authorized in the states in which they write business, although they must be licensed or authorized in the state in which they are domiciled.^[27] These companies have more flexibility and can react faster than standard line insurance companies because they are not required to file rates and forms.^[27] However, they still have substantial regulatory requirements placed upon them.

Most states require that excess line insurers submit financial information, articles of incorporation, a list of officers, and other general information.^[27] They also may not write insurance that is typically available in the admitted market, do not participate in state guarantee funds (and therefore policyholders do not have any recourse through these funds if an insurer becomes insolvent and cannot pay claims), may pay higher taxes, only may write coverage for a risk if it has been rejected by three different admitted insurers, and only when the insurance producer placing the business has a surplus lines license.^[27] Generally, when an excess line insurer writes a policy, it must, pursuant to state laws, provide disclosure to the policyholder that the policyholder's policy is being written by an excess line insurer.^[27]

On July 21, 2010, President Barack Obama signed into law the Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"), which took effect on July 21, 2011 and was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The NRRA changed the regulatory paradigm for excess line insurance. Generally, under the NRRA, only the insured's home state may regulate and tax the excess line transaction.^[28]

Insurance companies are generally classified as either mutual or stock companies. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies.

Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. However, not all states permit mutual holding companies.

Other possible forms for an insurance company include reciprocals, in which policyholders reciprocate in sharing risks, and Lloyd's organizations.

Insurance companies are rated by various agencies such as A. M. Best. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100% subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.

The types of risk that a captive can underwrite for their parents include property damage, public and product liability, professional indemnity, employee benefits, employers' liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.

Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:

• heavy and increasing premium costs in almost every line of coverage;
• difficulties in insuring certain types of fortuitous risk;
• differential coverage standards in various parts of the world;
• rating structures which reflect market trends rather than individual loss experience;
• insufficient credit for deductibles and/or loss control efforts.

There are also companies known as 'insurance consultants'. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies. Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.

The financial stability and strength of an insurance company should be a major consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies provide information and rate the financial viability of insurance companies.

Across the world[link]

Life insurance premiums written in 2005

Non-life insurance premiums written in 2005

Global insurance premiums grew by 2.7% in inflation-adjusted terms in 2010 to $4.3 trillion, climbing abovepre-crisis levels. The return to growth and record premiums generated during the year followed two years of decline in real terms. Life insurance premiums increased by 3.2% in 2010 and non-life premiums by 2.1%. While industrialised countries saw an increase in premiums of around 1.4%, insurance markets in emerging economies saw rapid expansion with 11% growth in premium income. The global insurance industry was sufficiently capitalised to withstand the financial crisis of 2008 and 2009 and most insurance companies restored their capital to pre-crisis levels by the end of 2010. With the continuation of the gradual recovery of the global economy, it is likely the insurance industry will continue to see growth in premium income both in industrialised countries and emerging markets in 2011.

Advanced economies account for the bulk of global insurance. With premium income of $1,620bn, Europe was the most important region in 2010, followed by North America $1,409bn and Asia $1,161bn. Europe has however seen a decline in premium income during the year in contrast to the growth seen in North America and Asia. The top four countries generated more than a half of premiums. The US and Japan alone accounted for 40% of world insurance, much higher than their 7% share of the global population. Emerging economies accounted forover 85% of the world’s population but only around 15% of premiums. Their markets are however growing at a quicker pace. ^[29]

Regulatory differences[link]

In the United States, insurance is regulated by the states under the McCarran-Ferguson Act, with "periodic proposals for federal intervention", and a nonprofit coalition of state insurance agencies called the National Association of Insurance Commissioners works to harmonize the country's different laws and regulations.^[30] The National Conference of Insurance Legislators (NCOIL) also works to harmonize the different state laws.^[31]

In the European Union, the Third Non-Life Directive and the Third Life Directive, both passed in 1992 and effective 1994, created a single insurance market in Europe and allowed insurance companies to offer insurance anywhere in the EU (subject to permission from authority in the head office) and allowed insurance consumers to purchase insurance from any insurer in the EU.^[32]

The insurance industry in China was nationalized in 1949 and thereafter offered by only a single state-owned company, the People's Insurance Company of China, which was eventually suspended as demand declined in a communist environment. In 1978, market reforms led to an increase in the market and by 1995 a comprehensive Insurance Law of the People's Republic of China^[33] was passed, followed in 1998 by the formation of China Insurance Regulatory Commission (CIRC), which has broad regulatory authority over the insurance market of China.^[34]

In India, IRDA is insurance regulatory authority. As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA), which was constituted by an act of parliament. National Insurance Academy, Pune is apex insurance capacity builder institute promoted with support from Ministry of Finance and by LIC, Life & General Insurance compnies.

Controversies[link]

Insurance insulates too much[link]

An insurance company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be (since, by definition, the insured has transferred the risk to the insurer), a concept known as moral hazard. To reduce their own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies their risk of loss or liability.^{[citation needed]}

For example, life insurance companies may require higher premiums or deny coverage altogether to people who work in hazardous occupations or engage in dangerous sports. Liability insurance providers do not provide coverage for liability arising from intentional torts committed by or at the direction of the insured. Even if a provider were so irrational as to want to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal.^{[citation needed]}

Complexity of insurance policy contracts[link]

9/11 was a major insurance loss, but there were disputes over the World Trade Center's insurance policy

Insurance policies can be complex and some policyholders may not understand all the fees and coverages included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted detailed statutory and regulatory regimes governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be advertised and sold.

For example, most insurance policies in the English language today have been carefully drafted in plain English; the industry learned the hard way that many courts will not enforce policies against insureds when the judges themselves cannot understand what the policies are saying. Typically, courts construe ambiguities in insurance policies against the insurance company and in favor of coverage under the policy.

Many institutional insurance purchasers buy insurance through an insurance broker. While on the surface it appears the broker represents the buyer (not the insurance company), and typically counsels the buyer on appropriate coverage and policy limitations, it should be noted that in the vast majority of cases a broker's compensation comes in the form of a commission as a percentage of the insurance premium, creating a conflict of interest in that the broker's financial interest is tilted towards encouraging an insured to purchase more insurance than might be necessary at a higher price. A broker generally holds contracts with many insurers, thereby allowing the broker to "shop" the market for the best rates and coverage possible.

Insurance may also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company from whom the policyholder buys. Just as there is a potential conflict of interest with a broker, an agent has a different type of conflict. Because agents work directly for the insurance company, if there is a claim the agent may advise the client to the benefit of the insurance company. It should also be noted that agents generally can not offer as broad a range of selection compared to an insurance broker.

An independent insurance consultant advises insureds on a fee-for-service retainer, similar to an attorney, and thus offers completely independent advice, free of the financial conflict of interest of brokers and/or agents. However, such a consultant must still work through brokers and/or agents in order to secure coverage for their clients.

Limited consumer benefits[link]

In United States, economists and consumer advocates generally consider insurance to be worthwhile for low-probability, catastrophic losses, but not for high-probability, small losses. Because of this, consumers are advised to select high deductibles and to not insure losses which would not cause a disruption in their life. However, consumers have shown a tendency to prefer low deductibles and to prefer to insure relatively high-probability, small losses over low-probability, perhaps due to not understanding or ignoring the low-probability risk.^[35] This is associated with reduced purchasing of insurance against low-probability losses, and may result in increased inefficiencies from moral hazard.^[35]

Redlining[link]

Redlining is the practice of denying insurance coverage in specific geographic areas, supposedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.^[36]

In July, 2007, The Federal Trade Commission (FTC) released a report presenting the results of a study concerning credit-based insurance scores in automobile insurance. The study found that these scores are effective predictors of risk. It also showed that African-Americans and Hispanics are substantially overrepresented in the lowest credit scores, and substantially underrepresented in the highest, while Caucasians and Asians are more evenly spread across the scores. The credit scores were also found to predict risk within each of the ethnic groups, leading the FTC to conclude that the scoring models are not solely proxies for redlining. The FTC indicated little data was available to evaluate benefit of insurance scores to consumers.^[37] The report was disputed by representatives of the Consumer Federation of America, the National Fair Housing Alliance, the National Consumer Law Center, and the Center for Economic Justice, for relying on data provided by the insurance industry. ^[38]

All states have provisions in their rate regulation laws or in their fair trade practice acts that prohibit unfair discrimination, often called redlining, in setting rates and making insurance available.^[39]

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status, and education level. However, the use of such factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used.

An insurance underwriter's job is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes a greater likelihood of loss should theoretically be charged a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent.^{[citation needed]} Thus, "discrimination" against (i.e., negative differential treatment of) potential insureds in the risk evaluation and premium-setting process is a necessary by-product of the fundamentals of insurance underwriting. For instance, insurers charge older people significantly higher premiums than they charge younger people for term life insurance. Older people are thus treated differently than younger people (i.e., a distinction is made, discrimination occurs). The rationale for the differential treatment goes to the heart of the risk a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss (the insured's death) is greater in any given period of time and therefore the risk premium must be higher to cover the greater risk. However, treating insureds differently when there is no actuarially sound reason for doing so is unlawful discrimination.

What is often missing from the debate is that prohibiting the use of legitimate, actuarially sound factors means that an insufficient amount is being charged for a given risk, and there is thus a deficit in the system.^{[citation needed]} The failure to address the deficit may mean insolvency and hardship for all of a company's insureds.^{[citation needed]} The options for addressing the deficit seem to be the following: Charge the deficit to the other policyholders or charge it to the government (i.e., externalize outside of the company to society at large).^{[citation needed]}

Insurance patents[link]

New assurance products can now be protected from copying with a business method patent in the United States.

A recent example of a new insurance product that is patented is Usage Based auto insurance. Early versions were independently invented and patented by a major US auto insurance company, Progressive Auto Insurance (U.S. Patent 5,797,134) and a Spanish independent inventor, Salvador Minguijon Perez (EP 0700009 ).

Many independent inventors are in favor of patenting new insurance products since it gives them protection from big companies when they bring their new insurance products to market. Independent inventors account for 70% of the new US patent applications in this area.

Many insurance executives are opposed to patenting insurance products because it creates a new risk for them. The Hartford insurance company, for example, recently had to pay $80 million to an independent inventor, Bancorp Services, in order to settle a patent infringement and theft of trade secret lawsuit for a type of corporate owned life insurance product invented and patented by Bancorp.

There are currently about 150 new patent applications on insurance inventions filed per year in the United States. The rate at which patents have issued has steadily risen from 15 in 2002 to 44 in 2006.^[40]

Inventors can now have their insurance US patent applications reviewed by the public in the Peer to Patent program.^[41] The first insurance patent application to be posted was US2009005522 “Risk assessment company”. It was posted on March 6, 2009. This patent application describes a method for increasing the ease of changing insurance companies.^[42]

The insurance industry and rent-seeking[link]

Certain insurance products and practices have been described as rent-seeking by critics.^{[citation needed]} That is, some insurance products or practices are useful primarily because of legal benefits, such as reducing taxes, as opposed to providing protection against risks of adverse events. Under United States tax law, for example, most owners of variable annuities and variable life insurance can invest their premium payments in the stock market and defer or eliminate paying any taxes on their investments until withdrawals are made. Sometimes this tax deferral is the only reason people use these products.^{[citation needed]} Another example is the legal infrastructure which allows life insurance to be held in an irrevocable trust which is used to pay an estate tax while the proceeds themselves are immune from the estate tax.

Religious concerns[link]

Muslim scholars have varying opinions about insurance. Insurance policies that earn interest are generally considered to be a form of riba^[43] (usury) and some consider even policies that do not earn interest to be a form of gharar (speculation). Some argue that gharar is not present due to the actuarial science behind the underwriting.^[44]

Jewish rabbinical scholars also have expressed reservations regarding insurance as an avoidance of God's will but most find it acceptable in moderation.^[45]

Some Christians believe insurance represents a lack of faith^[46] and there is a long history of resistance to commercial insurance in Anabaptist communities (Mennonites, Amish, Hutterites, Brethren in Christ) but many participate in community-based self-insurance programs that spread risk within their communities.^[47][48][49]

See also[link]

• ACORD
• Agent of Record
• Earthquake loss
• Financial services (broader industry to which insurance belongs)
• Five for one
• Geneva Association (the International Association for the Study of Insurance Economics)
• Global assets under management
• Insurance fraud
• Insurance Hall of Fame
• Insurance law
• Insurance Premium Tax (UK)
• Intergovernmental Risk Pool
• The Invisible Bankers: Everything the Insurance Industry Never Wanted You to Know (book)
• List of finance topics
• List of insurance topics
• List of United States insurance companies
• Social security
• Uberrima fides
• Universal health care
• Welfare state

Country-specific articles:

• Insurance in Australia
• Insurance in India
• Insurance in the United States
• Insurance in the United Kingdom

Notes[link]

Bibliography[link]

• Dickson, P.G.M. (1960). The Sun Insurance Office 1710-1960: The History of Two and a half Centuries of British Insurance. London: Oxford University Press. pp. 324. 

External links[link]

Find more about Insurance on Wikipedia's sister projects:
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	Learning resources from Wikiversity
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	Quotations from Wikiquote
	Source texts from Wikisource
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Look up insurance in Wiktionary, the free dictionary.

• Congressional Research Service (CRS) Reports regarding the US Insurance industry
• Federation of European Risk Management Associations
• Insurance at the Open Directory Project
• Insurance Bureau of Canada
• Insurance Information Institute
• Museum of Insurance - displays thousands of antique insurance policies and ephemera
• National Association of Insurance Commissioners
• The British Library - finding information on the insurance industry (UK bias)

Barack Obama
44th President of the United States
Incumbent
Assumed office January 20, 2009
Vice President	Joe Biden
Preceded by	George W. Bush
Personal details
Born	Barack Hussein Obama II[1] (1961-08-04) August 4, 1961 (age 50) Honolulu, Hawaii, United States[1]
Nationality	American
Political party	Democratic
Spouse(s)	Michelle Robinson (m. 1992)
Children	Malia (b.1998) Sasha (b.2001)
Residence	The White House
Alma mater	Occidental College Columbia University (B.A.) Harvard Law School (J.D.)
Profession	Community organizer Attorney Author Constitutional law professor United States Senator President of the United States
Religion	Christian,[2] former member of United Church of Christ[3][4]
Signature
Website	WhiteHouse.gov

	This article is part of a series on Barack Obama
Background Illinois Senate US Senate Political positions Public image Family 2008 primaries Obama–Biden campaign Transition Inauguration Electoral history Presidency Timeline '09 '10 '11 '12 First 100 days Nobel Peace Prize Re-election campaign

Barack Obama being sworn in as President of the United States.

The Presidency of Barack Obama began at noon EST on January 20, 2009, when he became the 44th President of the United States. Obama was a United States Senator from Illinois at the time of his victory over Arizona Senator John McCain in the 2008 presidential election. Barack Obama is the first African-American president of the United States, as well as the first born in Hawaii.

His policy decisions have addressed a global financial crisis and have included changes in tax policies, legislation to reform the United States health care industry, foreign policy initiatives and the phasing out of detention of prisoners at the Guantanamo Bay detention camp in Cuba. He attended the G-20 London summit and later visited U.S. troops in Iraq. On the tour of various European countries following the G-20 summit, he announced in Prague that he intended to negotiate substantial reduction in the world's nuclear arsenals, en route to their eventual extinction. In October 2009, Obama was awarded the Nobel Peace Prize for "his extraordinary efforts to strengthen international diplomacy and cooperation between peoples."

Transition period[link]

The presidential transition period began following Obama's election to the presidency on November 4, 2008. The Obama-Biden Transition Project was co-chaired by John Podesta, Valerie Jarrett, and Pete Rouse. During the transition period, Obama announced his nominations for his Cabinet and administration. Shortly after the election on November 4, Obama chose Representative Rahm Emanuel of Illinois as White House Chief of Staff.^[5]

Cabinet nominations included former Democratic primary opponents Hillary Rodham Clinton for Secretary of State and Bill Richardson for Secretary of Commerce (although the latter withdrew on January 4, 2009). Obama appointed Eric Holder as his Attorney General, the first African-American appointed to that position. He also nominated Timothy F. Geithner to serve as Secretary of the Treasury.^[6] On December 1, Obama announced that he had asked Robert Gates to remain as Secretary of Defense, making Gates the first Defense head to carry over from a president of a different party.^[7] He nominated former Assistant Secretary of State for African Affairs Susan Rice to the United States Ambassador to the United Nations, which he restored to a Cabinet-level position.^[8]

During his transition, he maintained a website Change.gov, on which he wrote blogs to readers and uploaded video addresses by many of the members of his new cabinet.^[9] He announced strict rules for federal lobbyists, restricting them from financially contributing to his administration and forcing them to stop lobbying while working for him.^[10] The website also allowed individuals to share stories and visions with each other and the transition team in what was called the Citizen's Briefing Book, which was given to Obama shortly after his inauguration.^[11] Most of the information from Change.gov was transferred to the official White House website whitehouse.gov just after Obama's inauguration.^[12]

Inauguration[link]

Barack Obama was inaugurated on January 20, 2009. He officially assumed the presidency at 12:00 noon, EST,^[13] and completed the oath of office at 12:05 PM, EST. He delivered his inaugural address immediately following his oath. After his speech, he went to the President's Room in the House Wing of the Capitol and signed three documents: a commemorative proclamation, a list of Cabinet appointments, and a list of sub-Cabinet appointments, before attending a luncheon with congressional and administration leaders and invited guests.^[14] To commemorate the 200th anniversary of the birth of former President Abraham Lincoln, the same Bible that was used for Lincoln's inauguration was used in Obama's inauguration.^[15]

In administering the oath, Chief Justice John G. Roberts misplaced the word "faithfully" and erroneously replaced the phrase "President of the United States" with "President to the United States" before restating the phrase correctly; since Obama initially repeated the incorrect form, some scholars argued the President should take the oath again.^[16] On January 21, Roberts readministered the oath to Obama in a private ceremony in the White House Map Room, making him the seventh U.S. president to retake the oath; White House Counsel Greg Craig said Obama took the oath from Roberts a second time out of an "abundance of caution".^[17]

First 100 days[link]

Expectations[link]

Obama's 100th day in office was April 29, 2009. In his first post-election interview with 60 Minutes, Obama said that he has been studying Franklin Roosevelt's first 100 days,^[18] while adding, "The first hundred days is going to be important, but it's probably going to be the first thousand days that makes the difference."^[19]

Obama's first 100 days were highly anticipated ever since he became the presumptive nominee.^[20] Several news outlets created web pages dedicated to covering the subject.^[21] Commentators weighed in on challenges and priorities within domestic, foreign, economic, and environmental policy.^{[22][23][24][25]} CNN lists a number of economic issues that "Obama and his team will have to tackle in their first 100 days", foremost among which is passing and implementing a recovery package to deal with the financial crisis.^[24] Clive Stafford Smith, a British human rights lawyer, expressed hopes that the new president will close Guantanamo Bay detention camp in his first 100 days in office.^[23] After aides of the president announced his intention to give a major foreign policy speech in the capital of an Islamic country, there were speculations in Jakarta that he might return to his former home city within the first 100 days.^[26]

The New York Times devoted a five-part series, which was spread out over two weeks, to anticipatory analysis of Obama's first hundred days. Each day, the analysis of a political expert was followed by freely edited blog postings from readers. The writers compared Obama's prospects with the situations of Franklin D. Roosevelt (January 16, Jean Edward Smith),^[27] John F. Kennedy (January 19, Richard Reeves),^[28] Lyndon B. Johnson (January 23, Robert Dallek),^[29] Ronald Reagan (January 27, Lou Cannon),^[30] and Richard Nixon.

Legislation and executive orders[link]

Within minutes of taking the Oath of Office on January 20, Obama's Chief of Staff, Rahm Emanuel, issued an order suspending last-minute federal regulations pushed through by outgoing President George W. Bush, planning to review everything still pending.^[31] Due to the economic crisis, the President enacted a pay freeze for Senior White House Staff making more than $100,000 per year,^[32] as well as announcing stricter guidelines regarding lobbyists in an effort to raise the ethical standards of the White House.^[33] He asked for a waiver to his own new rules, however, for the appointments of William Lynn to the position of Deputy Defense Secretary, Jocelyn Frye to the position of director of policy and projects in the Office of the First Lady, and Cecilia Muñoz to the position of director of intergovernmental affairs in the executive office of the president, leading to some criticism of hypocrisy and violation of his pledge for governmental openness.^[34][35]

In his first week in office, Obama signed Executive Order 13492 suspending all the ongoing proceedings of Guantanamo military commission and ordering the detention facility to be shut down within the year.^[36][37][38] He also signed Executive Order 13491 - Ensuring Lawful Interrogations requiring the Army Field Manual to be used as a guide for terror interrogations, banning torture and other coercive techniques, such as waterboarding.^[39] Obama also issued an executive order entitled "Ethics Commitments by Executive Branch Personnel", setting stricter limitations on incoming executive branch employees and placing tighter restrictions on lobbying in the White House.^[40] Obama signed two Presidential Memoranda concerning energy independence, ordering the Department of Transportation to establish higher fuel efficiency standards before 2011 models are released and allowing states to raise their emissions standards above the national standard.^[41] He also ended the Mexico City Policy, which banned federal grants to international groups that provide abortion services or counseling.^[42][43]

In his first week he also established a policy of producing a weekly Saturday morning video address available on whitehouse.gov and YouTube,^[44][45][46] much like those released during his transition period.^[47][48] The first address had been viewed by 600,000 YouTube viewers by the next afternoon.^[49]

The first piece of legislation Obama signed was the Lilly Ledbetter Fair Pay Act of 2009 on January 29, which revised the statute of limitations for filing pay discrimination lawsuits. Lilly Ledbetter joined Obama and his wife, Michelle, as he signed the bill, fulfilling his campaign pledge to nullify Ledbetter v. Goodyear.^[50] On February 3, he signed the Children's Health Insurance Program Reauthorization Act (CHIP), expanding health care from 7 million children under the plan to 11 million.^[51]

President Obama signs the ARRA into law on February 17, 2009 in Denver, Colorado. Vice President Joe Biden stands behind him. Obama addresses a joint session of Congress, with Vice President Joe Biden and House Speaker Nancy Pelosi.	Address Before a Joint Session of Congress (February 24, 2009) The American Recovery and Reinvestment Act of 2009 was a focal point of Barack Obama's February 24, 2009 Address Before a Joint Session of Congress. Address Before a Joint Session of Congress (February 24, 2009) (audio) Audio-only version
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After much debate, the American Recovery and Reinvestment Act (ARRA) was passed by both the House and Senate on February 13, 2009. Originally intended to be a bipartisan bill, the passage of the bill was largely along party lines. No Republicans voted for it in the House, and three moderate Republicans voted for it in the Senate (Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania).^[52] The bill combined tax breaks with spending on infrastructure projects, extension of welfare benefits, and education.^[53][54] The final cost of the bill was $787 billion, and almost $1.2 trillion with debt service included.^[55] Obama signed the Act into law on February 17, 2009, in Denver, Colorado.^[56]

On March 9, 2009, Obama lifted restrictions on federal funding of embryonic stem cell research,^[57] and in doing so, called into question some of George W. Bush's signing statements. Obama stated that he too would employ signing statements if he deems upon review that a portion of a bill is unconstitutional,^[58][59] and he has issued several signing statements.^[60]

Early in his presidency, Obama signed a law raising the tobacco tax 62 cents on a pack of cigarettes.^[61] The tax is to be "used to finance a major expansion of health insurance for children", and "help some [smokers] to quit and persuade young people not to start".^[61]

In October 2011, Obama instituted the We Can't Wait program, which involved using executive orders, administrative rulemaking, and recess appointments to institute policies without the support of Congress.^[62] The initiative was developed in response to Congress's unwillingness to pass economic legislation proposed by Obama, and conflicts in Congress during the 2011 debt ceiling crisis.^[63]

Approval ratings and opinion[link]

2009[link]

After his transition period, Obama entered office with an approval rating of 82%.^[64] At the end of his first week, 68% of respondents in a Gallup poll approved of how Obama was handling his job, the second highest approval rating for a President shortly after being elected since World War II.^[65] Throughout early February polls showed scattered approval ratings: 62% (CBS News),^[66] 64% (USA Today/Gallup), 66% (Gallup), and 76% in an outlier poll (CNN/Opinion Research).^[67][68] Gallup reported the congressional address in late February boosted his approval from a term-low of 59% to 67%.^[69]

Throughout autumn 2009, Rasmussen estimated Obama's approval as fluctuating between 45% and 52% and his disapproval between 48% and 54%;^[70] as of November 11, Pew Research estimated Obama's approval between 51% and 55% and his disapproval between 33% and 37% since July.^[71]

Handling of the economy[link]

Rasmussen reported in mid-February 2009, that 55% of voters gave Obama good or excellent marks on his handling of the economy.^[72] In early March, a The Wall Street Journal survey of 49 economists gave Obama an average grade of 59 out of 100, with 42% of the respondents surveyed giving the administration's economic policies a grade below 60 percent. In comparison, only 30% of those same economists considered the response of governments around the world to the global recession to have been adequate.^[73] In April, a Gallup poll showed trust in Obama's economic policy with 71% saying they had "a fair amount" or "a great deal" of confidence in Obama's handling of the economy, higher than for Ben Bernanke, Tim Geithner, or leaders of Congress.^[74] Another Gallup poll in June showed 55% of Americans approved Obama's overall handling of the economy, but 48% and 51% disapproved of his handling of the federal budget deficit and controlling federal spending, respectively.^[75] A CBS News poll taken August 27–31 showed 53% of those polled approved of his handling of the economy.^[76] A Rasmussen poll taken on November 12 found 45% of Americans rating Obama's handling of the economy as poor and 39% rating him as doing a good or excellent job. They found 72% of Democrats rated his handling of the economy as good or excellent, while only 10% of Republicans and 27% of voters not affiliated with either party agreed.^[77]

2010[link]

On March 25, 2010, following his signing of landmark health care reform legislation into law, Obama's polling was revealed by Bloomberg to be 50%, with higher marks for relations with other countries (58%) and his running of the war in Afghanistan (54%). "Obama's approval rating is roughly equal to what Bill Clinton had at this point in his presidency, according to data maintained by Gallup (and) higher than the 45 percent Ronald Reagan recorded in April 1982" and more favorable than Democrats or Republicans office in 2010. They found Obama's approval rating was at 85% among Democrats, compared with 46% among independents and 11% among Republicans.^[78]

Fox News released the results of two polls on April 8–9, 2010. The first showed a drop in Obama's approval rating to 43%, with 48% disapproving. In that poll, Democrats approved of Obama's performance 80–12%, while independents disapproved 49–38%.^[79] The other poll, which concentrated on the economy, showed disapproval of Obama's handling of the economy by a 53–42% margin, with 62% saying they were dissatisfied with the handling of the federal deficit.^[80] According to a Gallup Poll released April 10, 2010, President Obama had a 45% approval rating, with 48% disapproving.^[81] In a poll from Rasmussen Reports, released April 10, 2010, 47% approved of the President's performance, while 53% disapproved.^[82][83]

2011[link]

Obama's approval rating jumped to a high following the death of Osama Bin Laden on May 2, 2011. A GfK poll conducted May 5, 2011 found his approval rating to be 60%. During the debt ceiling debate in August 2011, Obama's approval rating dropped to the low-40s.^[84]

This section requires expansion.

Major legislation[link]

2009[link]

• January 29: Lilly Ledbetter Fair Pay Act
• February 4: Children's Health Insurance Reauthorization Act
• February 11: DTV Delay Act
• February 17: American Recovery and Reinvestment Act
• March 30: Omnibus Public Lands Management Act of 2009
• April 21: Edward M. Kennedy Serve America Act
• May 20: Fraud Enforcement and Recovery Act
• May 20: Helping Families Save Their Homes Act of 2009
• May 22: Credit Card Accountability, Responsibility, and Disclosure Act of 2009
• June 22: Family Smoking Prevention and Tobacco Control Act
• August 6: Cash For Clunkers Extension Act
• October 22: Veterans Health Care Budget Reform and Transparency Act
• October 28: Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act
• October 30: Ryan White HIV/AIDS Treatment Extension Act
• November 6: Worker, Homeownership, and Business Assistance Act of 2009

2010[link]

• January 27: Emergency Aid to American Survivors of Haiti Earthquake Act
• March 4: Travel Promotion Act
• March 18: Hiring Incentives to Restore Employment Act (HIRE Act)
• March 23: Patient Protection and Affordable Care Act
• March 30: Health Care and Education Reconciliation Act of 2010
• May 5: Caregivers and Veterans Omnibus Health Services Act of 2010
• May 17: Daniel Pearl Freedom of the Press Act
• July 1: Comprehensive Iran Sanctions, Accountability, and Divestment Act
• July 21: Dodd-Frank Wall Street Reform and Consumer Protection Act
• July 22: Unemployment Compensation Extension Act of 2010
• July 22: Improper Payments Elimination and Recovery Act of 2010
• August 10: SPEECH Act
• September 27: Small Business Jobs and Credit Act of 2010
• December 9: Animal Crush Video Prohibition Act of 2010
• December 13: Healthy, Hunger-Free Kids Act of 2010
• December 17: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
• December 22: Don't Ask, Don't Tell Repeal Act of 2010

2011[link]

• January 2: James Zadroga 9/11 Health and Compensation Act of 2010 (H.R. 847)
• January 4: Food Safety and Modernization Act, Pub.L. 111-353, H.R. 2751
• August 2: Budget Control Act of 2011
• October 21: United States-Colombia Free Trade Agreement Implemention Act
• October 21: United States-Panama Free Trade Agreement Implemention Act
• October 21: United States-South Korea Free Trade Agreement Implemention Act

Personnel[link]

Cabinet appointees[link]

The Obama Cabinet
Office	Name	Term
President	Barack Obama	2009–present
Vice President	Joe Biden	2009–present
Secretary of State	Hillary Clinton	2009–present
Secretary of Treasury	Timothy Geithner	2009–present
Secretary of Defense	Robert Gates*	2006–2011
	Leon Panetta	2011–present
Attorney General	Eric Holder	2009–present
Secretary of the Interior	Ken Salazar	2009–present
Secretary of Agriculture	Tom Vilsack	2009–present
Secretary of Commerce	Gary Locke	2009–2011
	John Bryson	2011–present
Secretary of Labor	Hilda Solis	2009–present
Secretary of Health and Human Services	Kathleen Sebelius	2009–present
Secretary of Education	Arne Duncan	2009–present
Secretary of Housing and Urban Development	Shaun Donovan	2009–present
Secretary of Transportation	Ray LaHood	2009–present
Secretary of Energy	Steven Chu	2009–present
Secretary of Veterans Affairs	Eric Shinseki	2009–present
Secretary of Homeland Security	Janet Napolitano	2009–present
Chief of Staff	Rahm Emanuel	2009–2010
	William Daley	2011–2012
	Jacob Lew	2012–present
Administrator of the Environmental Protection Agency	Lisa Jackson	2009–present
Director of the Office of Management and Budget	Peter Orszag	2009–2010
	Jacob Lew	2010–2012
	Jeffrey Zients**	2012–present
Ambassador to the United Nations	Susan Rice	2009–present
United States Trade Representative	Ron Kirk	2009–present
*Retained from previous administration **Acting

Twenty-two members of the Obama administration are either in the United States Cabinet (15) or are in positions considered to be Cabinet-level (7). The members of the Cabinet are the heads of the fifteen major departments (State, Defense, Justice, etc.), and the seven cabinet-level positions are the Vice President, White House Chief of Staff, Administrator of the Environmental Protection Agency, Director of the Office of Management and Budget, U.S. Trade Representative, Ambassador to the United Nations, and the Chair of the Council of Economic Advisers.^[85][86] Since Robert Gates was a member of the previous administration, his letter of resignation (a formality at the end of a President's term) was simply not accepted, and he did not need confirmation.^[87] On January 19, 2009, Senate Democratic leaders requested fifteen of the twenty positions to be ratified by unanimous consent,^[88] and seven gained unanimous confirmation by voice vote the next day: Ken Salazar, Steven Chu, Arne Duncan, Peter Orszag, Eric Shinseki, Tom Vilsack, and Janet Napolitano.^[87][89] On January 21, Obama presided over the swearing in of the seven unanimous nominees.^[90] Later that day, the Senate confirmed Hillary Clinton by a 94–2 vote. On January 22, several more confirmations were approved unanimously: Susan E. Rice, Ray LaHood, Lisa P. Jackson, and Shaun Donovan.^[91] On January 26, the Senate confirmed Geithner by a 60–34 margin.^[92][93]

At the conclusion of Obama's first week as President, Hilda Solis, Tom Daschle, Ron Kirk, and Eric Holder had yet to be confirmed, and there had been no second appointment for Secretary of Commerce.^[93] Holder was confirmed by a vote of 75–21 on February 2,^[94] and on February 3, Obama announced Senator Judd Gregg as his second nomination for Secretary of Commerce.^[95] Daschle withdrew later that day amid controversy over his failure to pay income taxes and potential conflicts of interest related to the speaking fees he accepted from health care interests.^[96] Solis was later confirmed by a vote of 80-17 on February 24,^[97] and Ron Kirk was confirmed on March 18 by a 92-5 vote in the Senate.^[98]

Gregg, who was the leading Republican negotiator and author of the TARP program in the Senate, after publication that he had a multi-million dollar investment in the Bank of America, on February 12, withdrew his nomination as Secretary of Commerce, citing "irresolvable conflicts" with President Obama and his staff over how to conduct the 2010 census and the American Recovery and Reinvestment Act of 2009.^[99][100] Former Washington governor Gary Locke was nominated on February 26^[101] as Obama's third choice for Commerce Secretary and confirmed on March 24 by voice vote.^[102]

On March 2, Obama introduced Kansas governor Kathleen Sebelius as his second choice for Secretary of Health and Human Services. He also introduced Nancy-Ann DeParle as head of the new White House Office of Health Reform, which he suggested would work closely with the Department of Health and Human Services.^[103][104] At the end of March, Sebelius was the only remaining Cabinet member yet to be confirmed.^[102]

Six high-ranking cabinet nominees in the Obama administration had their confirmations delayed or rejected among reports that they did not pay all of their taxes, including Tom Daschle, Obama's original nominee for Health and Human Services Secretary, and Treasury Secretary Timothy Geithner.^[105] Though Geithner was confirmed, and Senator Max Baucus, chairman of the Senate Finance Committee, thought Daschle would have been confirmed, Daschle withdrew his nomination on February 3.^[96] Obama had nominated Nancy Killefer for the position of Chief Performance Officer, but Killefer also withdrew on February 3, citing unspecified problems with District of Columbia unemployment tax.^[106] A senior administration official said that Killefer's tax issues dealt with household help.^[106] Hilda Solis, Obama's nominee for Secretary of Labor, faced delayed confirmation hearings due to tax lien concerns pertaining to her husband's auto repair business,^[107] but she was later confirmed on February 24.^[97] While pundits puzzled over U.S. Trade Representative-designate Ron Kirk's failure to be confirmed by March 2009, it was reported on March 2 that Kirk owed over $10,000 in back taxes. Kirk agreed to pay them in exchange for Senate Finance Committee Chairman Max Baucus's aid in speeding up the confirmation process;^[108] he was later confirmed on March 18.^[98] On March 31, Kathleen Sebelius, Obama's nominee for Health and Human Services secretary, revealed in a letter to the Senate Finance Committee that her Certified Public Accountant found errors in her tax returns for years 2005-2007. She, along with her husband, paid more than $7,000 in back taxes, along with $878 in interest.^[109]

Notable non-Cabinet positions[link]

Appointees serve at the pleasure of the President and were nominated by Barack Obama except as noted.

• Chair of the Federal Deposit Insurance Corporation
  • Sheila Bair¹ (2009–2011)
• Special envoy for Afghanistan and Pakistan
  • Richard Holbrooke (2009–2010)
  • Marc Grossman (2011–present)
• Assistant to the President for National Security Affairs
  • Retired General James L. Jones (2009–2011)
  • Thomas E. Donilon (2011–present)
• Special envoy to the Middle East
  • George J. Mitchell (2009–2011)
  • David Hale (2011–present)
• Director of the Federal Bureau of Investigation
  • Robert Mueller² (2009–present)
• Director of the Central Intelligence Agency
  • Leon Panetta (2009–2011)
  • Michael Morell (Acting-2011)
  • David Petraeus (2011–present)
• Chair of the Council of Economic Advisers
  • Christina Romer (2009–2010)
  • Austan Goolsbee (2010–2011)
  • Alan Krueger (2011–present)
• Chair of the Securities and Exchange Commission
  • Mary Schapiro (2009–present)
• Assistant to the President for Economic Policy and Director of National Economic Council
  • Lawrence Summers (2009–2010)
  • Gene Sperling (2011–present)
• Chairman of the Economic Recovery Advisory Board
  • Paul Volcker (2009–2011)
  • Replaced by Council on Jobs and Competitiveness in 2011
• Chairperson of the Council on Jobs and Competitiveness
  • Jeffrey R. Immelt (2011–present)

¹Appointed by George W. Bush in 2006 to a five-year term
²Appointed by George W. Bush in 2001 to a ten-year term

Judicial nominees[link]

United States Supreme Court[link]

Obama appointed the following Justices to the Supreme Court of the United States:

• Sonia Sotomayor – 2009
• Elena Kagan – 2010

Other courts[link]

Outside of the Supreme Court, by October 2009, Obama had nominated fewer than two dozen judges to fill judicial vacancies, of which there were close to 100. This has prompted some Democrats to criticize the pace of Obama's judicial appointments as too slow.^[110] In December 2009, Senator Patrick Leahy criticized Republicans for stalling those judicial nominations that had been made, noting that the Senate confirmed more district and circuit court nominees during the first year of the George W. Bush administration than it had approved by that point during the Barack Obama presidency.^[111]

As of July 2010, Obama's nominees to the district and circuit courts had been confirmed at a rate of only 43.5 percent, compared to 87.2 percent during Bill Clinton's administration and 91.3 percent for George W. Bush. The Center for American Progress, which compiled the data, commented:

Judicial confirmations slowed to a trickle on the day President Barack Obama took office. Filibusters, anonymous holds, and other obstructionary tactics have become the rule. Uncontroversial nominees wait months for a floor vote, and even district court nominees—low-ranking judges whose confirmations have never been controversial in the past—are routinely filibustered into oblivion. Nominations grind to a halt in many cases even after the Senate Judiciary Committee has unanimously endorsed a nominee. ^[112]

Policies[link]

Economy[link]

Upon entering office, Obama planned to center his attention on handling the global financial crisis.^[113] Even before his inauguration he lobbied Congress to pass an economic stimulus bill,^[114] which became the top priority during his first month in office.^[115] As President, Obama made a high profile trip to Capitol Hill, Washington, D.C. to dialog with Congressional Republicans and advocate for the bill.^[116] On February 17, 2009, Obama signed into law a $787 billion plan that included spending for health care, infrastructure, education, various tax breaks and incentives, and direct assistance to individuals.^[117] The tax provisions of the law reduced taxes for 98 percent of taxpayers, bringing tax rates to their lowest levels in 60 years.^[118]

As part of the 2010 budget proposal, the Obama administration has proposed additional measures to attempt to stabilize the economy, including a $2–3 trillion measure aimed at stabilizing the financial system and freeing up credit. The program includes up to $1 trillion to buy toxic bank assets, an additional $1 trillion to expand a federal consumer loan program, and the $350 billion left in the Troubled Assets Relief Program. The plan also includes $50 billion intended to slow the wave of mortgage foreclosures.^[117] The 2011 budget includes a three-year freeze on discretionary spending, proposes several program cancellations, and raises taxes on high income earners to bring down deficits during the economic recovery.^[119]

Obama speaking with former President Bill Clinton and Senior Advisor Valerie Jarrett about job creation in July 2010.

In a July 2009 interview with ABC News, Biden was asked about the sustained increase of the U.S. unemployment rate from May 2007 to October 2009^[120] despite the administration's multi-year economic stimulus package passed five months earlier. He responded "The truth is, we and everyone else, misread the economy. The figures we worked off of in January were the consensus figures and most of the blue chip indexes out there ... the truth is, there was a misreading of just how bad an economy we inherited."^[121][122] The White House indicates that 2 million jobs were created or saved due to the stimulus package in 2009^[123] and self reporting by recipients of the grants, loans, and contracts portion of the package report that the package saved or created 608,317 jobs in the final three months of 2009.^[124]

The unemployment rate rose in 2009, reaching a peak in October at 10.1% and averaging 10.0% in the fourth quarter.^[125] Following a decrease to 9.7% in the first quarter of 2010, the unemployment rate fell to 9.6% in the second quarter, where it remained for the rest of the year.^[125] Between February and December 2010, employment rose by 0.8%, which was less than the average of 1.9% experienced during comparable periods in the past four employment recoveries.^[126] GDP growth returned in the third quarter of 2009, expanding at a 1.6% pace, followed by a 5.0% increase in the fourth quarter.^[127] Growth continued in 2010, posting an increase of 3.7% in the first quarter, with lesser gains throughout the rest of the year.^[127] Overall, the economy expanded at a rate of 2.9% in 2010.^[128]

During November–December 2010, Obama and a lame duck session of the 111th Congress focused on a dispute about the temporary Bush tax cuts, which were due to expire at the end of the year. Obama wanted to extend the tax cuts for taxpayers making less than $250,000 a year. Congressional Republicans agreed but also wanted to extend the tax cuts for those making over that amount, and refused to support any bill that did not do so.^[129] All the Republicans in the Senate also joined in saying that, until the tax dispute was resolved, they would filibuster to prevent consideration of any other legislation, except for bills to fund the U.S. government.^[130][131] On 7 December, Obama strongly defended a compromise agreement he had reached with the Republican congressional leadership that included a two-year extension of all the tax cuts, a 13-month extension of unemployment insurance, a one-year reduction in the FICA payroll tax, and other measures.^[132] On December 10, Senator Bernie Sanders (I-VT) led a filibuster against the compromise tax proposal, which lasted over eight hours.^[133] Obama persuaded many wary Democrats to support the bill,^[134] but not all; of the 148 votes against the bill in the House, 112 were cast by Democrats and only 36 by Republicans.^[135] The $858 billion Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which The Washington Post called "the most significant tax bill in nearly a decade",^[136] passed with bipartisan majorities in both houses of Congress and was signed into law by Obama on December 17, 2010.^[134]

Ethics[link]

Lobbying reform[link]

Early in his presidential campaign, Obama stated that "they [lobbyists] won't find a job in my White House", but softened his stance later in the campaign.^[137] On January 21, 2009, Obama issued an executive order for all future appointees to his administration, which stated, no appointee who was a registered lobbyist within the two years before his appointment could participate on matters in which he lobbied for a period of two years after the date of appointment.^[40] Three formal waivers were initially issued in early 2009, out of 800 executive appointments:^[138][139] to William J. Lynn III, a lobbyist for Raytheon, to hold the position of Deputy Secretary of Defense;^[34] to Jocelyn Frye, former general counsel at the National Partnership for Women and Families, to serve as Director of Policy and Projects in the Office of the First Lady; and to Cecilia Muñoz, former senior vice president for the National Council of La Raza,^[138] to serve as Director of Intergovernmental Affairs in the Executive Office of the President.^[139] As of March 21, 2009, at least thirty officials appointed by Obama had been lobbyists in the past five years.^[137] Ten additional waivers were announced in September 2009.^[140]

Not all recent former lobbyists require waivers; those without waivers write letters of recusal stating issues from which they must refrain because of their previous jobs.^[138] USA Today reported that 21 members of the Obama administration have at some time been registered as federal lobbyists, although most have not within the previous two years.^[141] Lobbyists in the administration include William Corr, an anti-tobacco lobbyist, as Deputy Secretary of Health and Human Services^[142] and Tom Vilsack, who lobbied in 2007, for a national teachers union, as Secretary of Agriculture.^[141] Also, the Secretary of Labor nominee, Hilda Solis, formerly served as a board member of American Rights at Work, which lobbied Congress on two bills Solis co-sponsored,^[143] and Mark Patterson, Treasury Secretary Timothy Geithner's chief of staff, is a former lobbyist for Goldman Sachs.^[141]

The Citizens for Responsibility and Ethics in Washington have criticized the administration, claiming that Obama is retreating from his own ethics rules barring lobbyists from working on the issues about which they lobbied during the previous two years by issuing waivers. According to Melanie Sloan, the group's executive director, "It makes it appear that they are saying one thing and doing another."^[141]

Transparency[link]

Obama presents his first weekly address as President of the United States, discussing the American Recovery and Reinvestment Act of 2009.

The Obama administration has said that all executive orders, non-emergency legislation, and proclamations will be posted to the official White House website, whitehouse.gov, allowing the public to review and comment for five days before the President signs the legislation.^[144] The pledge was twice broken during Obama's first month in office when he signed SCHIP legislation and the Lilly Ledbetter Fair Pay Act with less than the full five days of "sunlight before signing". The administration has said that they are still "working through implementation procedures and some initial issues with the congressional calendar".^[145][146]

During his first week in office, Obama announced plans to post a video address each week on the site,^[44] and on YouTube,^[45] informing the public of government actions each week. During his speech at the 2008 Democratic National Convention, Obama stated, "I will also go through the federal budget, line by line, eliminating programs that no longer work and making the ones we do need work better and cost less - because we cannot meet twenty-first century challenges with a twentieth century bureaucracy."^[147]

On January 21, 2009, by executive order, Obama revoked Executive Order 13233, which had limited access to the records of former United States Presidents.^[148] Obama issued instructions to all agencies and departments in his administration to "adopt a presumption in favor" of Freedom of Information Act requests.^[149] In April 2009, the United States Department of Justice released four legal memos from the Bush administration to comply voluntarily with a Freedom of Information Act lawsuit filed by the American Civil Liberties Union.^[150] The memos were written by John Yoo^[151] and signed by Jay Bybee and Steven Bradbury, then Principal Assistant Attorneys General to the Department of Justice, and addressed to John A. Rizzo, general counsel of the Central Intelligence Agency.^[152] The memos describe in detail controversial interrogation methods the CIA used on prisoners suspected of terrorism.^[153][154] Obama became personally involved in the decision to release the memos, which was opposed by former CIA directors Michael Hayden, Porter Goss, George Tenet and John Deutch.^[152] Former Vice President Dick Cheney criticized Obama for not releasing more memos; Cheney claimed that unreleased memos detail successes of CIA interrogations.^[155]

The American Recovery and Reinvestment Act requires all recipients of the funds provided by the act to publish a plan for using the funds, along with purpose, cost, rationale, net job creation, and contact information about the plan to a website Recovery.gov so that the public can review and comment. Inspectors General from each department or executive agency will then review, as appropriate, any concerns raised by the public. Any findings of an Inspector General must be relayed immediately to the head of each department and published on Recovery.gov.^[156]

On June 16, 2009, Citizens for Responsibility and Ethics in Washington (CREW) filed a lawsuit against the Obama administration in order to get information about the visits of coal company executives. Anne Weismann, the chief counsel for CREW, stated "The Obama administration has now taken exactly the same position as the Bush administration... I don't see how you can keep people from knowing who visits the White House and adhere to a policy of openness and transparency." On June 16, MSNBC reported that its more comprehensive request for visitor logs since Obama's January 20 inauguration had been denied.^[157] The administration announced that White House visitor logs will be made available to the public on an ongoing basis, with certain limitations, for visits occurring after September 15, 2009.^[158] Beginning on January 29, 2010, the White House did begin to release the names of its visitor records.^[159] Since that time, names of visitors (which includes not only tourists, but also names of union leaders, Wall Street executives, lobbyists, party chairs, philanthropists and celebrities), have been released. The names are released in huge batches up to 75,000 names at a time.^[160] Names are released 90–120 days after having visited the White House. The complete list of names is available online by accessing the official White House website.^[161]

Obama stated during the 2008 Presidential campaign that he would have negotiations for health care reform televised on C-SPAN, citing transparency as being the leverage needed to ensure that people stay involved in the process taking place in Washington. This did not fully happen and Politifact gives President Obama a "Promise Broken" rating on this issue.^[162] After White House press secretary Robert Gibbs initially avoided addressing the issue,^[163] President Obama himself acknowledged that he met with Democratic leaders behind closed doors to discuss how best to garner enough votes in order to merge the two (House and Senate) passed versions of the health care bill. Doing this violated the letter of the pledge, although Obama maintains that negotiations in several congressional committees were open, televised hearings. Obama also cited an independent ethics watchdog group describe his administration as the most transparent in recent history.^[164]

The Obama administration has been characterized^[165] as much more aggressive than the Bush and other previous administrations in their response to whistleblowing and leaks to the press. Three people have been prosecuted under the rarely used Espionage Act of 1917. They include Thomas Andrews Drake, a former National Security Agency (NSA) employee who was critical of the NSA's Trailblazer Project,^{[166][167][168]} Stephen Jin-Woo Kim, a State Department contractor who allegedly had a conversation about North Korea with James Rosen of Fox News,^[169][170] and Jeffrey Sterling, who allegedly was a source for James Risen's book State of War. Risen has also been subpoenaed to reveal his sources, another rare action by the government.^[171]

Foreign policy[link]

The first meeting between Dmitry Medvedev and Barack Obama before the G20 summit in London on April 1, 2009.

In his inaugural address, Obama suggested that he plans to begin the process of withdrawing from Iraq and continuing to focus on the war in Afghanistan. He also mentioned lessening the nuclear threat through "working tirelessly with old friends and former foes". He spoke about America's determination to combat terrorism, proclaiming America's spirit is "stronger and cannot be broken — you cannot outlast us, and we will defeat you." To the Muslim world, Obama extended an invite to "a new way forward, based on mutual interest and mutual respect". He also said the USA would "extend a hand" to those "who cling to power through corruption and deceit" if they "are willing to unclench" their fists.^[172] Shortly after his inauguration President Obama first called President Abbas of the Palestinian National Authority (PNA). Calls were also made to President Mubarak of Egypt, Prime Minister Olmert of Israel and King Abdullah of Jordan.^[173] Obama and Secretary of State Hillary Clinton named George Mitchell as Special Envoy for Middle East peace and Richard Holbrooke as special representative to Pakistan and Afghanistan on January 23, 2009.^[174] At the same time, Obama called on Israel to open the borders of Gaza, detailing early plans on his administration's peace plans for the Israeli–Palestinian conflict.^[175]

President Obama and First Lady Michelle Obama are welcomed by Queen Elizabeth II to Buckingham Palace in London, April 1, 2009.

On February 18, 2009, Obama announced that the U.S. military presence in Afghanistan would be bolstered by 17,000 new troops by summer.^[176] The announcement followed the recommendation of several experts including Defense Secretary Robert Gates that additional troops be deployed to the war-torn nation.^[177][178]

Obama declared his plan for ending the Iraq War on February 27, 2009, in a speech at Camp Lejeune, North Carolina, before an audience of Marines stationed there. According to the president, combat troops will be withdrawn from Iraq by August 2010, leaving a contingent of up to 50,000 servicemen and servicewomen to continue training, advisory, and counterterrorism operations until as late as the end of 2011.^[179][180]

Other characteristics of the Obama administration on foreign policy include a tough stance on tax havens,^[181] continuing military operation in Pakistan,^[182] and avowed focus on diplomacy to prevent nuclear proliferation in Iran^[183] and North Korea.^[184]

On April 1, 2009, Obama and China's President, Hu Jintao, announced the establishment of the U.S.-China Strategic and Economic Dialogue and agreed to work together to build a positive, cooperative, and comprehensive U.S.-China relationship for the 21st century.^[185]

In that same month, Obama requested that Congress approve $83.4 billion of supplemental military funding, mostly for the war in Iraq and to increase troop levels in Afghanistan. The request also includes $2.2 billion to increase the size of the US military, $350 million to upgrade security along the US-Mexico border, and $400 million in counterinsurgency aid for Pakistan.^[186]

In May 2009, it was reported that Obama plans to expand the military by 20,000 employees.^[187]

On June 4, 2009, Obama delivered a speech at Cairo University in Egypt.^[188] The wide ranging speech called for a "new beginning" in relations between the Islamic world and the United States.^[189][190] The speech received both praise and criticism from leaders in the region.^{[191][192][193][194][195]} In March 2010, Secretary of State Clinton criticized the Israeli government for approving expansion of settlements in East Jerusalem.^[196]

On April 8, 2010, Obama and Russian President Dmitry Medvedev signed the latest Strategic Arms Reduction Treaty (START), a "major" nuclear arms control agreement that reduces the nuclear weapons stockpiles of both countries.^[197]

In March 2011, international reaction to Muammar Gaddafi's military crackdown on rebel forces and civilians in Libya culminated in a United Nations resolution to enforce a no fly zone in Libya. Obama authorized U.S. forces to participate in international air attacks on Libyan air defenses using Tomahawk cruise missiles to establish the protective zone.^[198]

Guantánamo Bay detention camp[link]

On his first day in office, Obama requested a 120-day suspension of all trials for alleged terrorists held at the Guantánamo Bay detention camp, so the new administration could "review the military commissions process, generally, and the cases pending before military commissions as of 2011^[update], specifically".^[199] Another order established a task force to lead a review of detention policies, procedures and individual cases. Obama addressed the State Department that "the United States will not torture" and drafted an executive order to close Guantánamo within a year.^[200] On January 22, 2009, Obama signed an executive order ensuring safe, lawful, and humane treatment of individuals detained in armed conflicts. This order restricts interrogators to methods listed and authorized by an Army Field Manual.^[201] A detainee released since Obama took office claimed in an interview with Agence France-Presse that conditions at Guantánamo had worsened, stating guards wanted to "take their last revenge" before the facility is closed.^[202] On March 13, 2009, the administration announced that it would no longer refer to prisoners at Guantánamo Bay as enemy combatants, but it also asserted that the president has the authority to detain terrorism suspects there without criminal charges.^[203]

The case review of detainee files by administration officials and prosecutors was made more difficult than expected as the Bush administration had failed to establish a coherent repository of the evidence and intelligence on each prisoner. By September 2009, prosecutors recommended to the Justice Department which detainees are eligible for trial, and the Justice Department and the Pentagon worked together to determine which of several now-scheduled trials will go forward in military tribunals and which in civilian courts. While 216 international terrorists are already held in maximum security prisons in the U.S., Congress was denying the administration funds to shut down the camp and adapt existing facilities elsewhere, arguing that the decision was "too dangerous to rush".^[204] In November, Obama stated that the U.S. would miss the January 2010 date for closing the Guantánamo Bay prison as he had ordered, acknowledging that he "knew this was going to be hard". Obama did not set a specific new deadline for closing the camp, citing that the delay was due to politics and lack of congressional cooperation.^[205] The state of Illinois has offered to sell to the federal government the Thomson Correctional Center, a new but largely unused prison, for the purpose of housing detainees. Federal officials testified at a December 23 hearing that if the state commission approves the sale for that purpose, it could take more than six months to ready the facility.^[206]

Killing of Osama bin Laden[link]

	President Obama on Osama bin Laden's Death President Obama's address (Full Text)  President Obama on Osama bin Laden's Death audio only version
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Obama, sitting next to Biden, with the U.S. national security team gathered in the Situation Room to monitor the progress of Operation Neptune Spear.

Wikisource has original text related to this article: Remarks by the President on Osama Bin Laden

Starting with information received in July 2010, intelligence developed by the CIA over the next several months determined what they believed to be the location of Osama bin Laden in a large compound in Abbottabad, Pakistan, a suburban area 35 miles from Islamabad.^[207] CIA head Leon Panetta reported this intelligence to Obama in March 2011.^[207] Meeting with his national security advisers over the course of the next six weeks, Obama rejected a plan to bomb the compound, and authorized a "surgical raid" to be conducted by United States Navy SEALs.^[207] The operation took place on May 1, 2011, resulting in the death of bin Laden and the seizure of papers and computer drives and disks from the compound.^[208][209] Bin Laden's body was identified through DNA testing,^[210] and buried at sea several hours later.^[211] Within minutes of Obama's announcement from Washington, DC, late in the evening on May 1, there were spontaneous celebrations around the country as crowds gathered outside the White House, and at New York City's Ground Zero and Times Square.^[208][212] Reaction to the announcement was positive across party lines, including from predecessors George W. Bush and Bill Clinton,^[213] and from many countries around the world.^[214]

Overseas Contingency Operation[link]

Obama discontinued use of the term "War on Terror" and instead uses the term "Overseas Contingency Operation". However, Obama has stated that the U.S. is at war with Al-Qaeda, saying "Our nation is at war, against a far-reaching network of violence and hatred."^[215]

In April 2010, the Obama administration authorized the targeted killing of the radical Muslim cleric and American citizen Anwar al-Awlaki, who was believed to have shifted from encouraging attacks on the United States to directly participating in them.^[216]

Gun control[link]

During the presidential campaign, Obama announced that he favors measures that respect Second Amendment rights, while at the same time keeping guns away from children and criminals.^[217][218] On February 25, 2009, Attorney General Eric Holder announced that the Obama administration would seek a new assault weapons ban across the United States, saying that it would have a positive impact on the drug-related violence in Mexico.^[219] After the statement drew criticism from the NRA and some House Democrats, the Administration reportedly ordered the Justice Department to end public discussion of the issue.^[220] Obama has signed into law two bills containing amendments reducing restrictions on gun owners, one which permits guns to be transported in checked baggage on Amtrak trains^[221] and another which allows carrying loaded firearms in national parks located in states allowing concealed carry.^[222][223]

Science and technology[link]

Wikinews has related news: NSA to participate in U.S. cybersecurity

President Obama during a call to the crew aboard the ISS.

Cybersecurity[link]

Obama initiated a 60-day review of cybersecurity^[224] by Melissa Hathaway, a consultant for Booz Allen Hamilton, appointed Acting Senior Director for Cyberspace.^[225][226]

The New York Times reported in 2009, that the NSA is intercepting communications of American citizens including a Congressman, although the Justice Department believed that the NSA had corrected its errors.^[227] United States Attorney General Eric Holder resumed the wiretapping according to his understanding of the Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008 that Congress passed in July 2008, but without explaining what had occurred.^[228]

Environment[link]

On January 27, 2009, Obama issued two presidential memoranda concerning energy policy. One directed the Department of Transportation to raise fuel efficiency standards incrementally to 35 miles per US gallon (15 km/L) by 2020, and the other directed the Environmental Protection Agency to allow individual states to set stricter tailpipe emissions regulations than the federal standard.^[41][229]

The American Recovery and Reinvestment Act of 2009 provides $54 billion in funds to double domestic renewable energy production, renovate federal buildings making them more energy-efficient, improve the nation's electricity grid, repair public housing, and weatherize modest-income homes.^[230]

On February 10, 2009, Obama overturned a Bush administration policy that had opened up a five-year period of offshore drilling for oil and gas near both the Atlantic and Pacific coasts. Interior Secretary Ken Salazar has been quoted as saying, "To establish an orderly process that allows us to make wise decisions based on sound information, we need to set aside" the plan "and create our own timeline".^[231]

On May 19, 2009, Obama announced a plan to increase the Corporate Average Fuel Economy national standards for gasoline mileage, by creating a single new national standard that will create a car and light truck fleet in the United States that is almost 40 percent cleaner and more fuel-efficient by 2016, than it is today, with an average of 35.5 miles per gallon.^[232] Environmental advocates and industry officials welcomed the new program, but for different reasons. Environmentalists called it a long-overdue tightening of emissions and fuel economy standards after decades of government delay and industry opposition. Auto industry officials said it would provide the single national efficiency standard they have long desired, a reasonable timetable to meet it and the certainty they need to proceed with product development plans.^[232]

On March 30, 2010, Obama partially reinstated Bush administration proposals to open certain offshore areas along the Atlantic coastline, the eastern Gulf of Mexico and the north coast of Alaska to oil and natural gas drilling. The proposals had earlier been set aside by President Obama after they were challenged in court on environmental grounds.^[233]

On May 27, 2010, Obama extended a moratorium on offshore drilling permits after the April 20, 2010 Deepwater Horizon oil spill which is considered to be the worst oil spill in U.S. history.^[234][235] Although BP took responsibility for the disaster and its ongoing after effects, Obama began a federal investigation along with forming a bipartisan commission to review the incident and methods to avoid it in the future.^{[236][237][238]} Obama visited the Gulf Coast on May 2 and May 28 and expressed his frustration on the June 8 NBC Today Show, by saying "I don't sit around just talking to experts because this is a college seminar. We talk to these folks because they potentially have the best answers, so I know whose ass to kick."^[239] Obama's response to the disaster drew confusion and criticism within segments of the media and public.^[240]

NASA[link]

President Obama speaks at Kennedy Space Center, April 15, 2010.

Obama set up the Augustine panel to review the Constellation program in 2009, and announced in February 2010, that he was cutting the program from the 2011 United States federal budget, describing it as "over budget, behind schedule, and lacking in innovation."^{[241][242][243][244][245]} After the decision drew criticism in the United States, a new "Flexible path to Mars" plan was unveiled at a space conference in April 2010.^{[246][247][248]} It included new technology programs, increased R&D spending, a focus on the International Space Station and contracting out flying crew to space to commercial providers.^[249] The new plan also increased NASA's 2011 budget to $19 billion from $18.3 billion in 2010.^[246]

In July 2009, Obama appointed Charles Bolden, a former astronaut, to be administrator of NASA.^[250]

Stem cell research[link]

On March 9, 2009, Obama repealed a Bush-era policy that prevented federal tax dollars from being used to fund research on new lines of embryonic stem cells. Such research has been a matter of debate between those who emphasize the therapeutic potential of such research and those who suggest that elements of this research breach ethical limitations. Obama stated that "In recent years, when it comes to stem cell research, rather than furthering discovery, our government has forced what I believe is a false choice between sound science and moral values...In this case, I believe the two are not inconsistent. As a person of faith, I believe we are called to care for each other and work to ease human suffering. I believe we have been given the capacity and will to pursue this research — and the humanity and conscience to do so responsibly."^[251]

Social policy[link]

On January 23, 2009, Obama rescinded the Mexico City Policy, a measure from the Reagan and Bush eras that required any non-governmental organization receiving U.S. Government funding to refrain from performing or promoting abortion services in other countries.^[252]

On June 17, 2009, Obama authorized the extension of some benefits (but not health insurance or pension benefits) to same-sex partners of federal employees.^[253] Obama has chosen to leave larger changes, such as the repeal of Don't ask, don't tell and the Defense of Marriage Act, to Congress.^[254][255]

On October 19, 2009, the U.S. Department of Justice issued a directive to federal prosecutors in states with medical marijuana laws not to investigate or prosecute cases of marijuana use or production done in compliance with those laws.^[256]

On December 16, 2009, President Obama signed the Consolidated Appropriations Act, 2010, which repealed a 21-year-old ban on federal funding of needle exchange programs.^[257]

On December 22, 2010, Obama signed the Don't Ask, Don't Tell Repeal Act of 2010, a bill that provides for repeal of the Don't ask, don't tell policy of 1993, that has prevented gay and lesbian people from serving openly in the United States Armed Forces.^[258] Repealing "Don't ask, don't tell" had been a key campaign promise that Obama had made during the 2008 presidential campaign.^[259][260]

Health care reform[link]

Once the stimulus bill was enacted, health care reform became Obama's top domestic priority. On July 14, 2009, House Democratic leaders introduced a 1,000 page plan for overhauling the US health care system, which Obama wanted Congress to approve by the end of the year.^[261]

The U.S. Congressional Budget Office (CBO) estimated the ten-year cost to the federal government of the major insurance-related provisions of the bill at approximately $1.0 trillion.^[262] In mid-July 2009, Douglas Elmendorf, director of the CBO, testified that the proposals under consideration would significantly increase federal spending and did not include the "fundamental changes" needed to control the rapid growth in health care spending.^[263][264] However after reviewing the final version of the bill introduced after 14 months of debate the CBO estimated that it would reduce federal budget deficits by $143 billion over 10 years and by more than a trillion in the next decade.^[265]

After much public debate during the Congressional summer recess of 2009, Obama delivered a speech to a joint session of Congress on September 9 where he addressed concerns over his administration's proposals.^[266] In March 2010, Obama gave several speeches across the country to argue for the passage of health care reform.^[267][268] On March 21, 2010, after Obama announced an executive order reinforcing the current law against spending federal funds for elective abortion services, the House, by a vote of 219 to 212, passed the version of the bill previously passed on December 24, 2009, by a 60-vote supermajority in the Senate. The bill, which includes over 200 Republican amendments, was passed without a single Republican vote. On March 23, 2010, President Obama signed the bill into law. Immediately following the bill's passage, the House voted in favor of a reconciliation measure to make significant changes and corrections to the Patient Protection and Affordable Care Act, which was passed by both houses with two minor alterations on March 25, 2010, and signed into law on March 30, 2010.^[269][270]

Education reform[link]

On March 30, 2010, Obama signed the Health Care and Education Reconciliation Act of 2010, which ended the role of private banks in lending out federally-insured student loans.^[271] By directly lending to students, the government is projected to save taxpayers $68 billion dollars over the next several years.^[272] Federally-insured student loans will instead be distributed by the Department of Education.^[273] The law also increased the amount of Pell Grant awards given each year, doubling its current funding.^[274][275] Starting in 2014, the law permits borrowers to cap the amount they spend on student loans each year to ten percent of their discretionary income and have their balance forgiven if they have faithfully paid the balance of their loan over 20 years.^[274][276] Additionally, the law seeks to make it easier for parents to qualify for Grad PLUS loans, and spends billions on poor and minority schools and $2 billion for community colleges.^[272][273]

Gates arrest controversy[link]

"Beer Summit" at the White House, July 30, 2009.
From left to right: Gates, Crowley, and President Obama.
Photo taken before Vice President Biden's arrival.

On July 16, 2009, prominent African American Harvard University professor Henry Louis Gates, Jr., was arrested at his Cambridge, Massachusetts home by a local white police officer, Cambridge Police Sgt. James Crowley, for disorderly conduct. Gates, who was locked out of his house, had attempted to break into his own property, thus causing the initial alarm from a neighbor who called 9-1-1. The incident sparked national controversy over whether Gates's civil rights had been violated by Crowley. On July 21, the Cambridge Police Department dropped charges against Gates. On July 22, President Barack Obama, commented on the incident over national and international television, criticized the arrest, and stated the police acted "stupidly" in handling the incident. National law enforcement organizations and members objected to Obama's comments and criticized his handling of the issue. In the aftermath, Obama stated that he regretted his comments exacerbating the situation, and hoped that the situation could become a "teachable moment". To reduce tensions, on July 24, Obama invited both parties to the White House to discuss the issue over beers, and on July 30, Obama and Vice President Joe Biden joined Crowley and Gates in a private, cordial meeting in a courtyard near the White House Rose Garden; this became known colloquially as the "Beer Summit".^[277]

Wall Street reform[link]

On July 21, 2010, Obama signed Dodd–Frank Wall Street Reform and Consumer Protection Act, considered to be the largest financial system overhaul since the New Deal. The law recognizes complex financial derivatives and makes rules to protect consumers from unfair practices in loans and credit cards by establishing a new consumer protection agency. At the signing ceremony in the Ronald Reagan Building in Washington D.C. Obama proclaimed, "There will be no more taxpayer-funded bailouts. Period." Obama also mentioned that "These reforms represent the strongest consumer financial protections in history." At the ceremony were Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass., the two committee chairmen who sponsored the bill.^[278]

2010 midterm elections[link]

Due in large part to voter frustration over high unemployment and a stalled economy, Republicans won control of the House in the 2010 midterm elections. On reflection after the election, Obama blamed himself, in part, for the many Democrats who went down to defeat knowing that they had risked their careers to support his agenda of economic stimulus legislation and a landmark health care bill.^[279] Democrats narrowly retained the Senate majority and will continue to control it through the 112th Congress.^[280]

Obama called the elections "humbling" and a "shellacking".^[281] He said that the results came because not enough Americans had felt the effects of the economic recovery.^[282]

2012 re-election campaign[link]

On April 4, 2011, President Obama announced that he would seek re-election in the 2012 presidential election. The campaign will be based in Chicago and is being run by many former members of the White House staff and members of the successful 2008 campaign.^[283]

References[link]