Insurance Regulation and Licensing
Who regulates insurance
Insurance is regulated primarily by the states under the McCarran-Ferguson Act (1945), which left oversight to the states and limited federal antitrust reach. In Delaware, Title 18 of the Delaware Code and the Insurance Commissioner - an elected official serving a four-year term - set the rules. The Department of Insurance licenses insurers and producers, reviews forms and rates, examines financial solvency (annual statements, risk-based capital), conducts market-conduct examinations, and disciplines licensees. A state guaranty association backs covered claims of insolvent insurers, up to statutory caps.
Licensing a producer
A candidate completes any required prelicensing education, passes the state exam for the line requested (property, casualty, life, health, or a combination), submits an application with fingerprints/background check and fees, and must be appointed by an insurer before soliciting business. Licenses renew on a set cycle, and Delaware producers complete 24 hours of continuing education per two-year term, including ethics hours.
Conduct rules
Producers hold premiums in a fiduciary capacity. Commingling premium funds with personal or agency money, or misappropriating premium, is grounds for revocation. Prohibited practices include rebating any part of the commission, twisting, misrepresentation, false advertising, coercion, unfair discrimination, and unauthorized use of an insurer's name. Commissions may be shared only with properly licensed producers.
Traps: a license and an appointment are different - the license lets you transact and be paid; the appointment authorizes you to act for a specific insurer. Delaware licenses a single 'producer' category, so 'agent versus broker' questions usually turn on who appointed the producer.
Rule of thumb: if the transaction gives the client something of value not written into the policy, assume it is a rebate unless a statute says otherwise.