Insurance Regulation
Who regulates insurance
Insurance in the United States is regulated primarily by the states, not the federal government. The McCarran-Ferguson Act (1945) confirmed that state regulation serves the public interest and exempted insurance from most federal antitrust law to the extent it is state-regulated. The NAIC is a voluntary association of regulators that drafts model laws and forms - it has no legal authority over anyone; only your state's statutes and regulations do.
Your state's insurance commissioner (in some states an elected official or auditor) administers the code: licensing producers and insurers, reviewing policy forms and rates, conducting financial and market-conduct examinations, investigating complaints, issuing cease-and-desist orders, levying fines, and suspending or revoking licenses. Rates must generally be adequate, not excessive, and not unfairly discriminatory.
Producer duties
A producer needs both a license (state-issued, line-specific, earned through prelicensing education and an exam) and an appointment (an insurer's authorization to represent it). Licenses must be renewed, continuing education completed, and name or address changes reported by the state's deadline. Premiums are held in a fiduciary capacity: keep them in a separate trust account, never commingle them with agency operating funds, and remit promptly.
Unfair trade practices
Expect questions on misrepresentation, twisting, rebating, false advertising, unfair discrimination, coercion, defamation, and unfair claim settlement practices. Rebating - offering part of the commission or anything of value not stated in the policy - is prohibited in most states.
Worked example
A producer deposits a client's $2,400 premium into the agency's general account and pays rent from it. That is commingling and a breach of fiduciary duty even if the client's policy is later bound - the violation is the handling, not the outcome.
Rule of thumb
License + appointment + continuing education + fiduciary handling = lawful authority to sell.