Insurance Regulation and Licensing (National)
Who regulates what
Insurance in the United States is regulated primarily by the states. The McCarran-Ferguson Act (1945) confirmed that state regulation serves the public interest and gives insurers a limited federal antitrust exemption - but only to the extent the activity is actually regulated by state law, and never for boycott, coercion, or intimidation. The NAIC is a voluntary association of regulators that drafts model laws, forms, and licensing exams; it has no legal authority of its own, so a model law is not law until a state enacts it. Each state insurance department issues licenses, reviews policy forms and rates, conducts financial and market-conduct examinations, and handles consumer complaints.
Producer licensing mechanics
A producer must hold a license for each line sold, be appointed by the insurer, and renew on the state's cycle with continuing education. Insurers must report appointments and terminations, including terminations for cause. Premiums collected are held in a fiduciary capacity - commingling premium with agency operating funds is a violation even if every dollar is eventually remitted to the insurer.
Traps
- Surplus lines carriers are not members of the state guaranty association, so the guaranty fund does not back them.
- Rate filing methods (prior approval, file-and-use, use-and-file, flex rating) are not interchangeable.
- Federal programs such as NFIP, TRIA, and ERISA are targeted exceptions, not a general federal takeover of insurance.
Rule of thumb
When a question asks who has authority, answer with the state statute or insurance department, not the NAIC. Worked example: an agent deposits a client's premium into the agency operating account and pays a claim from it. That is a fiduciary breach (commingling) regardless of intent and can support license suspension or revocation.