Market Conduct Regulation

Last Updated: 6/6/2023

Issue: Insurance impacts the public welfare by providing financial and economic stability to the public, so governments have a vested interest in making sure insurance companies remain solvent and treat consumers fairly by paying claims when there is a covered loss. The insurance market cannot grow unless there is public confidence in the marketplace. Insurance regulation helps foster this public confidence which is best secured in a market environment where regulation help ensure products are fairly priced, transparent, and readily available by many competing and reliable companies.  

Overview:   The goal of market regulation is to ensure consumers are charged fair and reasonable insurance prices. It also strives to ensure consumers have access to beneficial and compliant insurance products and are protected against insurers that fail to operate in ways that are legal and fair to consumers. Most market conduct regulation functions occur after a product or producer is operating in the marketplace. This is because market regulation is intended to make sure companies and producers are operating in the marketplace as they claimed they would. The focus of market conduct regulation is on a local, geographically defined area and deals with subjective data and company performance. This regulatory oversight is primarily on regulated entities’ compliance with laws and regulations other than those related to financial solvency. Market regulation complements financial solvency regulation. Problems spotted during a market conduct review can be a precursor to financial solvency concerns. Market regulation also evaluates companies’ fulfillment of contractual obligations to their policyholders and claimants. In a broad sense, market regulation encompasses functions that historically have been performed both within the various state insurance departments, such as rate and form review, producer licensing, and consumer assistance, and those functions that historically have been performed outside of the departments through market conduct examinations and investigations.

The NAIC Market Regulation Handbook provides guidance and encourages uniform market conduct regulation practices. The Handbook is updated annually, keeping market analysis and market conduct examinations standards current with newly adopted NAIC model laws, regulations, bulletins and other relevant materials.

Status: In 2011, the NAIC introduced a new Market Conduct Annual Statement (MCAS) collection system to provide states with a uniform system for collecting insurance companies' market-related information. Additionally, the Market Regulation and Consumer Affairs (D) Committee monitors all aspects of the market regulatory process for continuous improvement. This includes market analysis, regulatory interventions with companies, and multi-jurisdictional collaboration. The Committee also reviews and makes recommendations regarding the underwriting and market practices of insurers and producers as those practices affect insurance consumers, including the availability and affordability of insurance.