Because I deal with a large number of insurance issues in my day to day legal practice, I often have to determine what laws regulate the behavior of insurance agencies. Although the answer isn’t always simple, insurance agencies are generally regulated by state law. The majority of laws applicable to an insurance agency will likely depend on the jurisdiction where that agency is located. As a result, your state insurance department is always a good resource for determining how the insurance agencies within your state are regulated. Insurances companies and the insurance industry are also regulated by many federal guidelines that may not apply to insurance agencies.
Insurance policies are issued as contracts which protect an individual or business from a set of predetermined risks in exchange for a premium. Common types of insurance include health insurance, car insurance, home insurance and liability insurance. Although an insurance policy is dictated by the terms of the contract, insurance agencies are also regulated by the state and federal government and insurance contracts generally must be approved by a state insurance commissioner.
States regulate insurance agencies through the office of the state insurance commissioner as well as through laws passed by the state legislature. The laws that pertain to insurance agencies are different in every state, although they contain some commonalities. Additionally, the National Association of Insurance Commissioners, or NAIC, allows state insurance commissioners to share resources and work together to regulate the insurance industry. State insurance commissioners typically regulate the insurance industry within their state by providing directives and advisory opinions as well as by fining insurance agencies that fail to meet minimum standards. To find out about the specific body of law in your state directed at insurance agencies, locate the website for your state insurance commissioner.
States commonly regulate insurance agencies by creating laws that regulate the licensing of insurance agents and agencies. These state laws set forth the requirements to become an insurance agent and to operate as an insurance agency. States also typically dictate what information agencies must disclose, how changes in the structure of the business are to be handled, revocation and renewal of agency licenses and standards for contractual relationships between insurance agents and brokers.
Bad Faith Litigation
In addition to state and federal regulations, states have laws preventing insurance agencies from bad faith insurance practices. These practices include failing to act in the best interest of the insurance holder, failing to inspect after a loss, failure to pay-out after a loss and most other generally fraudulent practices. Check with the office of your state insurance commissioner or research bad faith litigation in your jurisdiction to determine the scope of bad faith insurance protections in your state.