Sunday, July 21, 2024


Insurance is regulated at the state level. However, some federal laws such as Fair Credit Reporting Act, Federal Emergency Management, and National Flood Insurance Program directly impact insurance. The purpose of regulating the insurance sector is for the good of the public and insurance companies’ clients. Every state enforces its own set of insurance laws and regulations to ensure that insurance companies conduct business most professionally and ethically.

In the state’s insurance department, the officials are charged with monitoring insurance matters within that specific state. Such officials are known as superintendents, commissioners of insurance, or directors, depending on the state in which they operate. On a higher level, these insurance commissioners are part of the organization called the National Association of Insurance Commissioners (NAIC). They organize meetings regularly to discuss coordination of the insurance regulatory measures across the states and exchange more information on insurance regulatory matters. It is through NAIC’s recommendations that many of the national insurance laws are proposed and take shape.

Regulation of property-casualty insurance agents

A property casualty insurance agent is a professional selling insurance under a property-casualty insurance license, for example, homeowner’s insurance, commercial property insurance, car insurance, and professional liability insurance. Property and casualty insurance is required to protect clients or their assets from liability.

The state devotes much of its time to work with insurance agents, and one of the critical responsibilities is licensing them. It is illegal for anyone to sell insurance without first obtaining the state license authorizing them to do so. To ascertain that the agents are professionally prepared to undertake insurance work, the state provides a licensing exam issued by the state licensing department. The insurance agent is required to pass the exam to obtain their operating license.

Another important thing is that a property-casualty insurance agent can only sell insurance in the state they are licensed. For example, an insurance agent licensed under Atlanta cannot provide insurance to a client residing in Indiana. However, the agent can obtain a nonresident agent license from Indiana to provide insurance for property located in that state.

Codes that regulate insurance agents

In addition to licensing, there are state insurance codes that ensure agents meet the proper insurance standards. That is because the state is responsible for how insurance agents conduct insurance business within that specific state.

  • An insurance agent can violate the law if they discriminate unfairly against insured clients. That means an insured client can’t be subjected to a higher or lower premium than another insured client under the same circumstances. It also means that the agent cannot receive a bribe to provide insurance or a lower premium for insurance.
  • Rebating is also illegal- this is whereby an agent offers some benefit to the client, such as cash or lowering the insurance premium as a kickback for doing business with them.
  • Insurance agents must advertise accurate statements of the insurance they are selling to avoid misinterpretation.
  • Twisting is also illegal- here, the agent convinces the client to cancel their existing insurance to buy their policy which is detrimental to the insured.
  • Insurance agents have a fiduciary duty towards their clients.


Any insurance agent who willfully misappropriates or embezzles money, funds, credits, premiums, or property of the insured is subject to legal punishment- imprisonment or fines.

Hank Pedro
the authorHank Pedro