Market Conduct Regulation
last updated 05/08/2014

Issue: In light of the 2008 global financial crisis, regulators and legislators are examining the structure and protections of the financial regulatory system. Increased attention has been on the efficiency and effectiveness of financial or prudential supervision. However, equal attention should also be given to consumer protection, encompassing not just financial supervision but also market regulation and oversight of company conduct.

Overview: An essential component of insurance regulation is the appropriate oversight of the ways insurance companies distribute their products in the marketplace, namely, market conduct regulation (or market regulation). Market conduct—a term commonly used in the insurance industry to describe problems associated with the distribution and sale of insurance—has become a key insurance regulatory focus over the last decade. Insurance regulators view market conduct as critical to ensuring the welfare of consumers and maintaining public confidence in the insurance industry. Market regulation attempts to ensure consumers are charged fair and reasonable insurance prices. It also strives to ensure consumers have access to beneficial and compliant insurance products, and are protected against insurers that fail to operate in ways that are legal and fair to consumers.

Market regulation is regulatory oversight that primarily focuses on regulated entities’ compliance with laws and regulations other than those related to financial solvency. Market regulation complements financial solvency regulation. Problems spotted during a market conduct review can be a precursor to financial solvency concerns. Market regulation also evaluates companies’ fulfillment of contractual obligations to their policyholders and claimants. In a broad sense, market regulation encompasses functions that historically have been performed both within the various state insurance departments, such as rate and form review, producer licensing, and consumer assistance, and those functions that historically have been performed outside of the departments through market conduct examinations and investigations.

The NAIC Market Regulation Handbook provides guidance and encourages uniform market regulation practices. The Handbook is updated annually, keeping current with newly adopted model laws, regulations, bulletins and other relevant materials. States have recently added market analysis as an additional tool to enhance market regulation. The purpose of market analysis is to identify, assess and prioritize market conduct problems that may have a substantial adverse impact on consumers, policyholders and claimants.

Status: In 2011, the NAIC introduced a new Market Conduct Annual Statement (MCAS) collection system to provide states with a uniform data collection system for collecting insurance companies' market-related information. Moreover, the Market Regulation and Consumer Affairs (D) Committee monitors all aspects of the market regulatory process for continuous improvement. In 2012, the Committee and its subgroups focused on issues that could directly affect the availability, affordability and apprehension of insurance for consumers in their states. To gain a baseline understanding of state activities, the Market Regulation and Consumer Affairs (D) Committee sent a survey to state insurance departments in 2012 to obtain additional information and further the discussion on the current state of market regulation. The survey collected information on the following areas: (1) market conduct activity; (2) the cost of market conduct regulation; (3) the market conduct exam team; and (4) how market conduct activity is documented.


Committees Active on This Topic

Market Regulation and Consumer Affairs (D) Committee

Press Releases

NAIC to Focus Attention on Market Regulation

Market Conduct Annual Statement Project to Include 45 Jurisdictions in 2011
New Standards Strengthen Market Regulation System
Additional Resources

Market Conduct Annual Statement

The Evolution of Market Regulation
NAIC/FIO Meeting on Market Conduct, December 2011
The Market Conduct Analysis Framework
October 2012, CIPR Newsletter
The Market Conduct Annual Statement Comes of Age
January 2012, CIPR Newsletter
Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

CIPR Staff