Property & Casualty Insurance Exam (National Portion)Insurance RegulationEasy
An insurance company operating in multiple states decides to revise its standard property insurance policy forms. Before implementing these revised forms, what action must the insurer take regarding state insurance regulators?
- AThe insurer is only required to inform the state insurance departments after the forms have been put into use.
- BThe insurer must wait for state legislatures to pass laws authorizing the new forms.
- CThe insurer must submit the revised forms to the National Association of Insurance Commissioners (NAIC) for approval.
- DThe insurer must file the revised forms with the insurance department in each state where they intend to use them.
Show answer & explanationAnswer & explanation
Correct answer: D. The insurer must file the revised forms with the insurance department in each state where they intend to use them.
Insurance is primarily regulated at the state level. Therefore, policy forms, rates, and rules must be filed with and approved by the insurance department in each state where an insurer intends to use them, unless the state operates under a 'file and use' system which still requires filing.
Why the other options are wrong
- A. This is incorrect; prior filing and often approval are required before use.
- B. State legislatures pass laws, but the approval of specific policy forms falls under the state insurance department's regulatory authority.
- C. NAIC develops model laws and regulations but does not approve individual insurer forms.
State Regulation of Insurance
The primary regulatory authority over the insurance industry in the United States, exercised by individual state insurance departments or commissioners, responsible for licensing, solvency, market conduct, and policy form/rate approval.
- McCarron-Ferguson Act (1945) affirmed state regulation
- Each state has its own insurance department
- Regulates solvency, rates, forms, and producer licensing
Memory trick: Each State Regulates its Own Insurance Domain.