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Personal and Business Banking

State Insurance Regulations

StreetWise Insurance Guide

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  • Summary
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State Insurance Regulations Determine Many Insurance Specifics

The laws and regulations that govern the insurance industry are chiefly determined by individual state governments and their insurance regulatory agencies. The fundamental purpose for such regulation, according to the National Association of Insurance Commissioners (NAIC), is to “protect American consumers” and ensure “that promises made by insurers are kept.”

State-by-state regulation also means that the specific insurance products available, what risks and benefits they cover and their costs can vary from state to state. For that reason, you may need to consult your state insurance commission office to determine answers to certain questions and issues or to make specific complaints. The NAIC website provides links to all state insurance offices, Throughout this guide, where you may need to refer to your state insurance office, we provide this link again.

State insurance regulation typically involves the following functions:

  • Licenses insurance companies.

    Insurance companies and insurance-related businesses in all states must be licensed before they can sell products and services to individuals and businesses. A company selling products in more than one state must be licensed in each state where it does business. State insurance offices make available public records of licensed insurers so that consumers can confirm a company's status.

  • Licenses insurance agents and brokers.

    Every individual who sells insurance must be licensed and comply with state insurance laws and regulations. Again, state insurance offices make available to the public a list of all licensed insurers.

  • Reviews and regulates insurance products and rates.

    All states require some type of oversight of insurance policy provisions and rates. However, this is one of the areas with the greatest variation among states. For example, some states require that insurers providing personal property-casualty insurance file and receive approval for their policy rates before they go into effect; other states simply require that rates be filed but have no review or approval process.

  • Regularly examines the financial condition of the insurance company.

    State regulators regularly review an insurance company's financial statements and accounting methods and procedures to be sure the company is in sound condition and can deliver the services it has contracted to provide to consumers. States have the authority to take over the running of a troubled or insolvent company to protect its policy holders.

  • Reviews the market and takes steps to ensure fair market practices.

    Fair market practices include fair pricing and ethical and fair treatment of insurance consumers. Responding to consumer complaints is one aspect of this regulatory function.

  • Provides consumer information and services.

    Helping consumers better understand insurance practices, products and services and responding to consumer complaints are also part of the state insurance regulators' job.

Source: National Association of Insurance Commissioners, Factsheet, “State Insurance Regulation: History, Purpose and Structure”