Insurance Regulation: Who Governs the Business
The state-based system
Insurance in the United States is regulated chiefly by the states. The McCarran-Ferguson Act (1945) confirmed that states regulate "the business of insurance" and that federal law does not override state regulation unless Congress specifically says so. This is why a candidate sees fifty regulators rather than one national chartering body.
The NAIC is not a regulator
The National Association of Insurance Commissioners drafts model laws, model regulations, and standardized financial statements. It has no legal authority: a model law binds no one until a state legislature enacts it, and a model regulation binds no one until a state adopts it.
Pennsylvania's regulator
The Pennsylvania Insurance Department, headed by a Commissioner appointed by the Governor, licenses insurers (Certificate of Authority), licenses producers by line of authority, reviews policy forms and rates, examines insurer finances and market conduct, and adjudicates consumer complaints. Insurers are either admitted (authorized) or non-admitted; surplus lines producers may place coverage with non-admitted carriers only when admitted markets cannot write it.
Rate and form regulation
States range from prior approval to file-and-use to use-and-file. Pennsylvania generally requires insurers to file P&C rates and supporting data with the Department and to obtain approval before use for most lines, while permitting competitive-market flexibility for some commercial lines.
Producer conduct
A producer must hold a license for the line, be appointed by the insurer, handle premium in a fiduciary capacity, avoid rebating and twisting, and complete continuing education. Guaranty associations pay covered claims of insolvent insurers, funded by assessments on member insurers.
Worked trap: "NAIC requires insurers to file rates in Pennsylvania." False on two counts - the NAIC has no power to require anything, and Pennsylvania filings go to the Pennsylvania Insurance Department.