State Insurance Department or Commission

Every state in the nation has an insurance commissioner. They normally report directly to the governor of the state just like the attorney general of each state reports to the governor of that state. The NAIC is an association of all the state insurance commissioners. The NAIC spends a lot of time drafting and holding hearings on new model laws and regulations for the insurance industry. This work of the NAIC has a gone a long way toward providing some degree of uniformity between the insurance laws and regulations of the various states. Their work has also acted as an impetus for the implementation of laws and regulations when a new area of significant need arises. Recently that area of need has been the sales methods of agents.
Insurance agents must obtain a license from each state (through the insurance commissioner’s office) in which they are soliciting business. If an agent is not a resident in a state in which he wishes to sell insurance products, the agent may ordinarily obtain a nonresident license from that state. You can check on the licensing (or disciplinary) status of your agent by simply contacting the insurance commissioner’s office of your state. Agents who sell variable life insurance products or other investment-related products must also obtain a license from the

Relationship between agent and insurance company

The law of agency, a separate and distinct area of the law, applies to the relationship between the insurance agent and the insurance company. A basic rule of agency law is that the principal is liable for the acts of its agents done within the scope of their agency authority. It is not to the life, health or disability income insurance company’s benefit to have agents who are acting inappropriately or illegally while they are representing the insurance company. Lawsuits against the agent invariably include the insurance company as a co-defendant for two reasons--because of the principal/agent relationship and also because the insurance company usually has deeper pockets than the agent.

Why is agency law important to policyholders? Because, unlike property and casualty insurance (homeowners and auto), the agent who sells life, health and disability income insurance is almost always regarded as the legal agent of the insurance company. Therefore, as a general rule, any wrongdoing by the agent, such as incorrectly completing your application for life, health or disability insurance, will legally be regarded as wrongdoing by the insurance company. In laymen’s terms, the insurance company of a life, health or disability income insurance agent is responsible for the acts of its agents while they are selling insurance to you. (Of course, if you are conspiring with the agent to cheat the company, that’s a different story.)

American Council of Life Insurers (ACLI)

The conduct of insurance agents has come under closer scrutiny in recent years as a result of the initiation of numerous class action law suits alleging inappropriate and inaccurate sales presentations by insurance agents. In response to this, organizations such as the American Council of Life Insurers (ACLI) and the National Association of Insurance Commissioners (NAIC) have proposed model regulations, market conduct principles and use of databases to improve agent practices.
The ACLI is an association of life insurance companies through which the industry is attempting to police itself.