Who oversees auto insurance companies?

Each state has its own system of regulation for auto insurance companies. These state regulating bodies issue licenses and examine a company's coverage, policies, and financial health. On a federal level, the states' regulating bodies meet with the National Association of Insurance Commissioners.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: May 25, 2022

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Things to Remember...

  • Every state has an individual insurance regulator

  • The individual consumer plays a role in the regulation of insurance companies

  • Insurance companies must prove they can offer fair pricing and plans

Every driver needs auto insurance, so it’s no surprise that insurance companies are one of the largest, most profitable, and tightly regulated industries in the United States.

Many of us depend on auto insurance companies to be there for us during challenging times such as accidents and breakdowns. Along with the vital role they play in our lives, insurance companies are tightly regulated.

But who exactly governs and regulates auto insurance companies? Who ensures that they offer the public fair prices, services, and plans?

This article will tell you everything you need to know about auto insurance regulations. 

In addition to seeing who regulates auto insurance companies, you can also find reliable auto insurance rates through an online comparison. Use our FREE auto insurance comparison tool by entering your ZIP code!

Who oversees auto insurance agencies?

Some people are surprised to learn that the federal government does not regulate insurance companies. Rather, auto insurance is regulated and governed on a state-by-state basis, mainly because the Constitution makes federal regulation difficult.

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State Regulation of Insurance Agencies

Auto insurance company regulations and the departments responsible for enforcing any regulation vary from state to state.

In Maine, the regulator is called the Bureau of Insurance. In California, auto insurance is regulated by the Department of Insurance.

Every state’s governing department ensures insurance companies can offer fair prices and match the coverage needs of the policyholder. In most cases, agency officials are appointed by the state governor.

State insurance regulation officials also oversee licensing. They examine and accept new insurance companies and check the competency of existing ones. These officials also require auto insurance companies to prove that they can pay out large claim amounts as well as offer customers fairly priced comparable options.

Crucial Regulation Tools

One of the most effective ways state departments ensure insurance companies provide fair coverage is by issuing state licenses. Insurance companies can only obtain licenses from the state’s department of insurance and can’t work without one.

Companies must undergo a diligent and highly detailed investigation of their policies, finances, and operations to obtain a license, and regulation does not stop once a license is issued. In most cases, the license is subject to periodic renewal. Much like the application process, the renewal phase involves a thorough examination.

State regulators examine policies, prices, procedures, and financial solubility. They also review the company’s reputation, dispute records, and issues filed by consumers. If a license is revoked, the insurance company can no longer offer products or services in that state.

National Association of Insurance Commissioners 

Insurance companies are not regulated on a federal level. But there is a federal association called the National Association of Insurance Commissioners (NAIC) that periodically brings the heads of each state insurance regulation department together.

The association typically meets on a semi-annual basis. At this time, regulators discuss what has worked and not worked for them, as well as the companies that should be rewarded or penalized.

The assembly offers state regulators a chance to unify procedures and policies and share ideas without official federal oversight. Commissioners can also take what they’ve learned back to their states to discuss with their departments. This somewhat uniform approach means customers can expect trustworthy online auto insurance from companies in all states.

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Regulation by Consumers

Individual state regulators ensure insurance companies act with honesty and fairness. But consumers play a significant role in regulation, too.

Consumers can quickly check company reputations, prices, offers, and practices thanks to online insurance comparison tools and easy access to information.

Today, the ability to instantly buy auto insurance online gives us an easy view of the most robust, affordable policies and help us pay attention to the fine print. Thanks to online comparison tools, the consumer can choose auto insurance with peace of mind.

As providers develop a reputation for excellent service, they tend to become known for outstanding reviews, testimonials, and the number of happy customers. Over time, companies offering less competitive services either get left behind or must reform to attract and keep more customers.

The Bottom Line on Who Governs Auto Insurance Companies

The federal government does not regulate auto insurance companies. Auto insurance regulation is carried out by individual state regulators, who make sure insurance companies provide fair coverage by issuing and overseeing state licenses. Without a license, auto insurance companies can’t operate in their state. Along with state regulators, the individual plays a vital role in ensuring auto insurance providers offer outstanding service.

Get peace of mind by comparing auto insurance rates using our FREE comparison tool!

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