Insurance Regulation
Who regulates, and how
Insurance in the District of Columbia is supervised by the Department of Insurance, Securities and Banking (DISB), headed by a Commissioner. Regulation pursues three goals: insurer solvency, fair treatment of policyholders, and market availability. The Commissioner licenses insurers and producers, approves policy forms and rates where required, examines insurer finances and market conduct, and may fine, suspend, or revoke a license and issue cease-and-desist orders.
Producer duties
You must hold a license before soliciting, and the insurer must appoint you before you write business. A license and an appointment are different things - a frequent test point. Premiums you collect belong to the insurer or the client, not to you: commingling or converting them is a fiduciary breach. Continuing education is required each license term, including ethics.
Prohibited conduct (unfair trade practices)
Misrepresentation, twisting (inducing a replacement through misrepresentation), rebating (offering part of your commission or anything of value not in the contract), coercion, intimidation, unfair discrimination, defamation of another insurer, and false advertising. Replacement of existing life coverage triggers disclosure and comparison requirements.
Traps
- The NAIC drafts model laws and exams; it has no legal authority. A model act binds you only if DC adopts it.
- McCarran-Ferguson leaves insurance to the states and DC, but ERISA preempts state law for self-funded employer plans, and federal law (ACA, HIPAA) overlays many health rules.
- The guaranty association protects policyholders of insolvent insurers within statutory limits; it is never a sales argument and does not cover self-funded plans.
Worked example
An agent tells a client, "Sign today and I'll pay your first month's premium out of my commission." That is a rebate - an illegal inducement even though it benefits the client. The correct answer in any question is: prohibited; discipline follows.