Insurance Regulation
Who regulates what
Insurance is regulated primarily by the states. The McCarran-Ferguson Act confirmed that state regulation continues and gives insurers a limited exemption from federal antitrust law so long as the state actively regulates. Missouri's regulator is the Department of Commerce and Insurance, headed by a director appointed by the governor. Know the regulator's functions: licensing insurers and producers, approving insurer formation and rates, conducting market-conduct and financial examinations, and enforcing unfair-trade-practice rules.
Producer licensing and duties
Producers must hold a state license and generally an appointment from the insurer. A producer holds premiums in a fiduciary capacity and may not commingle those funds with personal or agency money. Missouri relicenses on a two-year cycle and requires continuing education, including ethics hours. Nonresident producers obtain licenses through reciprocity.
Unfair trade practices
The list to memorize: misrepresentation, false advertising, twisting (misleading an insured into dropping one policy for another), churning (repeated replacement to generate commissions), rebating (offering anything of value not stated in the policy as an inducement to buy), coercion or intimidation, and unfair claim settlement practices. Rebating is the most heavily tested item - any inducement outside the contract is prohibited.
Claims standards and rate rules
Missouri's vexatious refusal to pay statute permits a court to award a penalty and attorney fees when an insurer unreasonably refuses to pay a covered claim. Rates must not be excessive, inadequate, or unfairly discriminatory; Missouri generally permits file-and-use filing. The state guaranty association pays covered claims of insolvent insurers up to statutory limits, funded by assessments on insurers - it is not a substitute for buying coverage.
Traps
Distinguish twisting from ordinary replacement. Know that a certificate of authority makes an insurer admitted while a surplus lines insurer is non-admitted. A license is not an appointment.
Worked example
A producer personally offers to pay the first month's premium to close a sale. Even though the customer benefits, this is an illegal rebate.