Insurance Regulation and Market Conduct
This domain tests how insurance markets are supervised and how insurers and intermediaries must behave toward customers. Questions commonly cover licensing, financial solvency, rate and form oversight, market-conduct examinations, disclosure, unfair practices, complaints, privacy, and anti-money-laundering controls.
Core rules
- Regulators pursue solvency, fair treatment, transparency, and market confidence. Solvency regulation alone is not enough; conduct rules govern sales, servicing, and claims.
- Insurers and intermediaries must hold the required licence for each class of business and jurisdiction. Licensing applies to entities and to individuals.
- Insurers must maintain capital and reserves, file financial reports, and comply with rate and policy-form rules where applicable.
- Market-conduct rules prohibit misrepresentation, unfair discrimination, rebating, twisting, improper replacement, and unfair claim settlement practices.
- Customers must receive material information about coverage, exclusions, costs, and the intermediary's role. Privacy laws require consent and safeguards for personal information.
- Complaints must be handled promptly, documented, and escalated through internal and external dispute routes.
- Anti-money-laundering controls include customer due diligence, suspicious-transaction reporting, and record keeping.
Worked example
An agent takes a client's email address from a policy application and adds it to a third-party marketing list without consent. The conduct breaches privacy rules and may also be an unfair market practice. The insurer must have a lawful basis for use, provide safeguards, and handle the resulting complaint. The reasoning is that personal information collected for underwriting cannot be repurposed freely; consent and purpose limitation apply throughout the policy lifecycle.
Traps that cost marks
- Assuming regulation is only about solvency.
- Forgetting that individual intermediaries, not just insurers, are licensed.
- Treating rebating or twisting as harmless sales tactics.
- Ignoring complaint records and privacy safeguards.