Unlike banking or securities, insurance in the United States is regulated mainly by the states. Each state, the District of Columbia and the US territories has its own insurance laws and its own regulator, usually called the department or division of insurance and headed by an insurance commissioner. The rules that protect you therefore depend on your state.
How the state-based system came about
According to the National Association of Insurance Commissioners (NAIC), the US Supreme Court ruled in Paul v. Virginia (1869) that insurance was not interstate commerce, which left regulation to the states for decades. In 1944, in United States v. South-Eastern Underwriters Association, the Court reversed course and held that insurance is interstate commerce that Congress may regulate.
Congress responded in 1945 with the McCarran-Ferguson Act. Its core rule is that federal laws should not be interpreted to invalidate or interfere with state insurance laws unless Congress clearly says otherwise. The Act also provides that federal antitrust laws generally do not apply to the business of insurance to the extent it is regulated by state law. Later federal laws, including the Gramm-Leach-Bliley Act and the Dodd-Frank Act, reaffirmed this state-based framework.
What state insurance departments do
- Licensing: insurers must be licensed (admitted) in each state where they sell most types of coverage, and agents, brokers and adjusters need state licenses too.
- Solvency oversight: regulators review financial statements, set capital requirements and conduct financial examinations so that insurers can pay future claims.
- Rates and policy forms: depending on the state and the line of insurance, rates and forms may need prior approval or may be filed and reviewed after use.
- Market conduct: examinations of sales, underwriting and claim practices, enforced through state unfair trade and unfair claims practices laws.
- Consumer help: every department accepts complaints and answers questions free of charge.
- Insolvency: when an insurer fails, the regulator takes it into receivership, and state guaranty associations pay many covered claims up to limits set by state law. See our guide to state guaranty associations.
The role of the NAIC
The NAIC, founded in 1871, is the standard-setting organization of the chief insurance regulators of the 50 states, the District of Columbia and five US territories (56 members). It is not a government agency and cannot enforce rules itself. Instead it develops model laws and regulations that states can adopt, maintains shared databases, and coordinates the supervision of insurers that operate in many states.
A key tool is the NAIC accreditation program, created in 1989 after several large insurers became insolvent. Accredited departments must meet baseline legal, financial and organizational standards for solvency regulation, with a full review roughly every five years and interim annual reviews. As of the NAIC's February 2026 update, all 50 states, the District of Columbia, Puerto Rico and the US Virgin Islands are accredited. This lets other states rely on the home state's financial oversight of a multistate insurer.
Where the federal government steps in
- Health insurance: the Affordable Care Act, enacted in March 2010, set nationwide standards for most private health plans, such as the marketplaces, essential health benefits and appeal rights, while states still license insurers and review plans. Self-funded employer health plans are governed mainly by federal law (ERISA) rather than state insurance law. See health claim appeals.
- Federal Insurance Office (FIO): established in the Treasury Department in 2010 by Title V of the Dodd-Frank Act. FIO monitors the insurance industry for risks to the financial system and for access to affordable coverage, represents the US in the International Association of Insurance Supervisors, helps administer the Terrorism Risk Insurance Program created under the Terrorism Risk Insurance Act of 2002. The NAIC stresses that FIO is not a regulator: it does not license insurers or approve products. Its authority excludes health insurance, most long-term care insurance and crop insurance.
Admitted vs nonadmitted insurers
An admitted insurer is licensed by your state, uses rates and forms subject to state rules, and is usually covered by the state guaranty association. A surplus lines (nonadmitted) insurer may cover risks that admitted insurers decline, through a licensed surplus lines broker. These policies offer more flexibility but generally less regulatory protection, and they usually fall outside guaranty association coverage. Always ask which type of insurer is issuing your policy.
What this means for you
- Check that the insurer and the agent or broker are licensed in your state; state insurance department websites offer lookup tools.
- Review the company's complaint record and financial strength before you buy; our article on checking insurer reliability explains how.
- If you have a dispute, start with your state insurance department; see what to do if a claim is denied.
Laws differ from state to state and change over time. This overview is general information, not legal advice. For coverage questions, contact Polis Re; policies are issued by licensed insurers and placed through licensed producers in your state.