Insurance Regulation
Who regulates what
Insurance in the United States is regulated primarily by the states under the McCarran-Ferguson Act (1945), which also preserved limited federal antitrust immunity for state-supervised insurance activity. Each state's insurance department enforces its own code; the NAIC is a voluntary association of regulators that drafts model laws and rating rules - models carry no legal force until a state adopts them. Federal law still overlays the system: ERISA governs self-funded employer plans, the ACA sets health market reforms, and GLBA/HIPAA drive privacy rules.
Powers of the commissioner
The commissioner issues and revokes licenses, approves or files policy forms and rates, conducts financial examinations (reserves, risk-based capital) and market-conduct examinations, issues cease-and-desist orders, levies fines, and may place companies in rehabilitation or liquidation. When an insurer fails, state guaranty associations pay limited covered claims - they are not a subsidy for bad management and do not protect the insurer's officers or agents.
Producer duties
Producers must be licensed for the line sold, appointed by the insurer, and appointed within the state's deadline after the first application is submitted. Prohibited practices include misrepresentation, twisting (misrepresenting a competitor or a policy to induce replacement), churning (replacing your own in-force coverage for commission), rebating any part of the premium or commission, unfair discrimination, defamation, and illegal inducements. Premiums are held in a fiduciary capacity.
Trap: the NAIC never 'enacts' a law, and question stems that name a model regulation are testing concepts, not a federal statute. Another classic distractor is rebating - no state permits it, even if a client requests it.
Worked example: An agent advertises a variable universal life product with 'guaranteed 12% annual returns.' Even if subaccounts performed that way historically, the statement is a misrepresentation of guaranteed benefits and an unfair trade practice - illustrations must be labeled hypothetical.
Rule of thumb: before answering, name the regulated act - soliciting, underwriting, or advertising - then match it to licensing, filing, or unfair-practice rules.