How insurance regulation is organized
Insurance in the United States is regulated mainly by the states. New York's Department of Financial Services licenses insurers and the agents, brokers, and adjusters who sell and service policies, reviews or approves many policy forms and rates, and examines how companies treat customers. A company or individual doing business in several states usually needs licenses in each, and rules on producer compensation, advertising, and replacement of existing policies vary from state to state. Federal law touches insurance in specific areas, such as certain health coverage rules and sanctions screening, but day-to-day supervision sits with the state regulator. Selling a product that functions as insurance without the proper license is one of the more serious problems a regulator can find.
Records a regulator will want
Keep licensing records for the entity and every individual producer, including continuing education and carrier appointments. Preserve complaint files with the full history of how each was handled, and keep copies of advertising and sales scripts as they were actually used. For carriers and managing general agents, claims handling files and underwriting guidelines are frequent targets in market conduct exams. In New York, sales of life insurance and annuities are subject to a best interest standard, so documentation of the review behind each recommendation matters. If a problem turns up internally, record how it was investigated and corrected.
Responding to the regulator
Letters from the Department of Financial Services usually carry response deadlines, and a thorough, accurate first answer often keeps a matter from growing. With a regulator's request or complaint in hand, we review the licenses involved and any prior regulatory history, and discuss whether the issue is isolated or systemic. Where an exam or investigation may lead to a fine or a consent order, we look at the facts the regulator is likely to rely on and the remedial steps that could be offered. For new ventures, we look at whether the product needs a license at all before it reaches customers.
