How Model Laws and Model Regulations Work
What Is a Model Law?
An NAIC model law is a proposed statutory framework developed and adopted by state insurance regulators through the NAIC’s process. It reflects a consensus among participating regulators and provides proposed language that states may consider when developing or revising their own insurance laws. Model laws are not federal law or binding on states; each state determines whether and how to adopt them.
Model Law Is:
- Proposed statutory language
- Developed by state insurance regulators to address a regulatory issue that may require national uniformity
- May be considered by states in enacting laws and/or regulations to address a regulatory issue
- Adopted through an open, public process
Model Law Is Not:
- Automatically binding. States decide whether, how, and when to adopt through their own processes
- A replacement for state law
- Required in every state
- Enacted in states without state action
Understanding Model Laws
Learn how model laws help address insurance regulatory issues and support state-led policymaking.
What Issues Do Model Laws Address?
NAIC model laws address a broad range of insurance regulatory issues. For example, they may help states establish standards for financial examinations, insurer solvency oversight, insurance fraud prevention, or the coordination of health insurance benefits.
How Do Model Laws Support State Insurance Regulation?
Model laws provide a common framework that states can consider when addressing shared regulatory challenges. Through the NAIC process, state regulators can develop proposed language to address emerging issues. After adoption by NAIC Members, each state decides whether to adopt the model, modify it, or take a different approach. The public can follow the development process on NAIC.org.
What Is the Difference Between a Model Law and a Model Regulation?
A model law is proposed language that states may use to create or update state law. A model regulation gives more detailed rules or procedures to help carry out a law. Both are developed through state-regulator-led NAIC processes. Neither one automatically applies in any state. Each state decides whether and how to use them.
Model Law
- Proposed language for state law
- Sets a legal framework or policy approach
- States consider it through their own legal process
- Used for broad policy goals
Model Regulation
- Proposed framework of rules or procedure to administer the law
- Explains details, procedures, or compliance steps
- States consider it through their own regulatory process
- Used for operational or technical details
How They Work Together
A model law may create a broad requirement for insurers. A model regulation may outline the records, reports, or procedures insurers and regulators use to meet that requirement.
Common Questions About Model Laws
Learn more about how model laws are developed, approved, and used within the state-based insurance regulatory system.
A model law is developed when state regulators determine a minimum national standard or greater uniformity is needed and that the proposal meets the formal model-law criteria (see below). A guideline is a regulatory best practice that states may use as appropriate, including as a basis for law, regulations, or bulletins.
State insurance regulators lead the model law process from start to finish. A state-regulator-led group studies the issue and writes the proposal. The parent committee and Executive Committee must approve the work before drafting begins, in most cases. Final adoption requires votes by state insurance regulators. NAIC staff provide legal, technical, and administrative support.
How Does a Model Law Move Through the NAIC Process?
Step 1: State Regulators Identify an Issue
A state-regulator-led group identifies a topic that may require creating a new model law, amending an existing model, or revising an existing model.
Step 2: The Proposal Must Meet the Model-Law Criteria
Before drafting starts, state regulators ask two main questions based on the NAIC’s model-law development process: Does the issue require a minimum national standard or uniformity across states? Does the proposal have a commitment from state insurance regulators to put significant regulatory and NAIC resources toward its adoption?
Step 3: Regulator Committees Authorize Development
In most cases, the committee must approve the request to develop a model law. The Executive Committee must also approve it before drafting begins. Different rules may apply when federal law requires a new model law.
Step 4: Regulators Draft the Model
A state-regulator-led group writes the model language with support from NAIC staff. The group reviews information and talks through policy language as part of the committee process.
Step 5: Regulators Expose the Draft for Public Comment
A proposed model must have at least one 30-day public comment period before the group or parent committee votes. Drafts are posted for the public to review through NAIC exposure drafts. Additional public comment periods may be necessary if the draft is revised based on comments received or needs further review.
Step 6: Regulators Deliberate and Revise
State regulators review comments and decide whether to update the draft. Public input becomes part of the record, but state regulators decide the final policy and wording.
Step 7: Adoption Requires Supermajority Votes
The responsible committee must adopt the model by a two-thirds majority. The Executive Committee and Plenary must also adopt it by a two-thirds majority.
Step 8: States Make Their Own Adoption Decisions
NAIC adoption does not mean the model is now state law. Each state decides whether and how to adopt it under state law and can also make additional changes for their state.
Step 9: Implementation Is Tracked
After NAIC adoption, state regulators and NAIC staff provide education and implementation support, and the NAIC tracks state action. NAIC model-law resources may include state action pages that help readers see how states have addressed a model.
Summary
State regulators decide when a model law should be created. They write and revise the proposal, ask for public input, and vote on adoption. Even after the NAIC approves a model law, each state decides whether and how it becomes law in that state and can also further adjust it before adoption.