Market conduct exams and regulatory actions against insurers

A market conduct examination is a state insurance department's audit of how an insurer treats policyholders: how it handles claims, applies its rates, cancels and renews policies, and sells and advertises. It is separate from the financial exam that checks whether the company can pay claims. When a department finds violations it can fine the company, order restitution, or require a corrective action plan, usually through a signed settlement called a consent order or stipulation.

Most of these cases are narrow, often a handful of files out of thousands, and a single fine says less about a large insurer than a headline suggests. The skill is reading what the order says the company did wrong, how many people it touched, and what the company had to do about it.

What a market conduct exam is, and what it is not

The National Association of Insurance Commissioners (NAIC) describes market conduct regulation as the oversight of how insurers and producers deal with consumers and follow state law, in contrast to solvency regulation, which looks at an insurer's financial health. On its market conduct regulation page, the NAIC says exams assess compliance in claims handling, underwriting, sales practices and marketing, and that departments pair exams with complaint monitoring and data analysis.

The exam is run by a state, under that state's law. The NAIC is not a regulator; it is the association of state regulators that writes the handbook examiners follow and runs the forums where states coordinate. Our guides to the NAIC and what your state insurance department does cover that division of labor.

Two things an exam is not:

• Not a rate approval. Rate review asks whether the prices an insurer filed are acceptable; see how car insurance rate approval works. A market conduct exam asks whether the company followed the rules, including its own filed rates and policy forms, when it dealt with real customers.
• Not a solvency check. An insurer can pass a financial exam and still be fined for mishandling claims, and the reverse. That is why financial strength ratings and conduct findings answer different questions.

What examiners actually look at

Exams are organized around functions of the business. The same categories show up in how regulators classify complaints. The NAIC's model regulation on complaint records (the 1992 version, still a useful map) sorts complaints by function: underwriting, marketing and sales, claims, and policyholder service. For a driver, that translates into four groups of questions.

Claims. Did the insurer acknowledge and decide claims within the time limits the state sets? Did it explain a denial in writing? Did it pay what the policy promises, including taxes and fees on a total loss settlement? Did it give the claimant the repair estimate? Time limits differ by state, as how fast an insurer must respond to your claim: state time limits explains.

Underwriting and rating. Did the insurer apply the rates and rating rules it filed? Did it cancel or non-renew policies for reasons and with notice the law allows? Examiners usually test this by comparing a sample of policy files with the filings on record. That is a general description of the method; the specifics depend on the state and the exam's scope.

Sales and marketing. Were advertisements accurate? Did agents misrepresent coverage? Were producers licensed and appointed?

Complaint handling. Did the company keep the required records of complaints and answer the department on time? In Kansas, for example, the department's 2024 complaint report says companies must respond to the department within 15 business days.

Where the data comes from

Regulators do not pick insurers at random. Missouri's Market Regulation Actions page describes the pipeline. Market analysis, it says, collects and trends data by line of business, including complaints, policy forms, premiums, losses, other regulatory actions and lawsuits, and that analysis helps target issues. Reasons for opening an exam or investigation include information from consumers or department staff, high complaint indices, misleading sales practices, problems found in financial exams, and information received from other regulators.

The NAIC adds a national layer. Its Market Conduct Annual Statement (MCAS) is a uniform data-collection and benchmarking system for claims and underwriting across multiple lines of business, which regulators use to spot patterns for individual companies and the industry. The NAIC says 49 jurisdictions participated by 2024 and Puerto Rico joins for the 2025 data year.

The practical meaning: your complaint matters beyond your own case. A complaint filed with your department becomes one row in the data that can flag a company. Our guide to after you file a department of insurance complaint: what to expect covers that path.

Single-state and multistate cases

A problem that hits one state's law is handled by that state. But an insurer's claims software or underwriting rule is often national, so the same issue appears in many states at once. For those cases the NAIC has a collaboration process.

The NAIC's Market Regulation Handbook chapter on collaborative actions (a 2023 version) says collaboration is meant for an issue affecting multiple jurisdictions, and not for compliance with a state-specific law that other states lack. It defines the roles:

• A Managing Lead State coordinates the response, named by the NAIC's Market Actions (D) Working Group or by the lead states.
• Lead States help lead it.
• Participating States join but may not take an active part.
• Each state names a Collaborative Action Designee as its contact.

Three features matter to a consumer. First, the handbook says the managing lead state should consider all options along a "continuum of market actions" and conduct an examination only when other options are not sufficient, so a multistate exam is not the default first step. Second, each participating state decides at the end whether it needs state-specific recommendations or its own action, and keeps its authority to act on its own. Third, states cannot force a company into a multistate settlement; the handbook notes that such settlements are normally entered by mutual agreement, with a consent order, voluntary settlement agreement or similar document recording any penalty.

The same chapter says that, unless the law requires otherwise, a multistate settlement agreement and the orders adopting it should not be confidential once executed and final, and that the duties imposed on the company should be transparent and available for public disclosure. That is the standard regulators set for themselves, so a final order is more likely to be findable than the examination work behind it, though state law governs what each department posts.

How cases end

Missouri's page lists three ways examinations and investigations conclude, and the categories apply broadly:

The page notes that monetary penalties follow statute and can rise for knowing violations. Note the last row. A company's name on a department's list of market regulation actions does not by itself mean it did anything wrong, because the list includes closed matters with no violations. The list displayed 1,046 entries on a November 2026 visit, covering many kinds of companies. Read the order, not the list.

Penalties come in four common forms, and each tells you something different:

1. Fine or forfeiture. Money paid to the state, often to a school or general fund, not to consumers.
2. Restitution. Money paid to affected policyholders, often through a look-back review of past claims.
3. Corrective action. Changes to procedures, training or software, with documentation due by a deadline.
4. Cease and desist. An order to stop the practice, with further penalties if it repeats.

An order read line by line: Missouri, 2015

A short, dated example shows the pieces. In 2015, the Missouri Director of Insurance approved a stipulation of settlement and voluntary forfeiture with State Auto Property & Casualty Insurance Company after a market conduct examination, according to the order on the department's site.

• The practice: The investigation found the company did not include sales tax in one private passenger automobile first-party total loss settlement and two commercial automobile total loss settlements, even though its policy provided for sales tax.
• The number affected found by examiners: three claims. That is the sample the department reviewed, not necessarily the whole problem, which is why the next item exists.
• The remedy for everyone else: the company agreed to pay total loss claims including sales tax under its policy terms, and to review all first-party total loss claims paid or processed from June 1, 2010 until the order closed the exam, paying restitution for unpaid sales tax with no reduction if the owner kept the vehicle as salvage, unless a clear policy provision supported it.
• The paperwork: documentation of compliance and restitution was due within 120 days of the final order.
• The penalty: a voluntary forfeiture of $3,000, payable to the Missouri State School Fund, with the department agreeing to seek no other penalties for the matters covered.

Three findings were small, the fine was small, but the look-back reached back about five years and covered every first-party total loss, so the real consumer remedy was the review. This is the pattern to look for: the headline number is the fine, but the consumer-relevant number is the size of the look-back. The relationship between actual cash value, taxes and fees in a total loss is covered in what state rules require insurers to do in a total loss valuation.

A larger file-review example: California, 2010

A claims-handling exam can be much broader. FenderBender reported a California settlement with Civil Service Employees Insurance Company and CSE Safeguard Insurance Company totaling $505,000 in penalties. According to that report, examiners reviewing claims handling for May 1, 2005 through April 30, 2006 selected 596 closed claim files at random and found 661 claim-handling violations, including not giving claimants a written basis for a total loss settlement, not paying all fees and taxes on total losses, and not explaining depreciation. The report adds that an earlier exam of 2000-2001 had ended in a $155,000 settlement for similar problems.

Two lessons. First, the count of violations (661) is higher than the count of files (596) because one file can contain several violations. Second, a repeat finding is a stronger signal than a single one: the report shows the same kinds of problems recurring in a later exam.

How to read an order: a checklist

Use this sequence on any consent order, stipulation or press release:

1. Find the legal entity. Orders name a specific company with an NAIC code, not a brand. Your policy shows the entity that issued it. See which legal entity actually insures you: reading your policy documents.
2. Find the date and the review period. The order date, the exam period and the practices at issue may be years apart, as in the examples above.
3. Identify the practice. Is it claims handling, rating, cancellation, sales, or recordkeeping? Match it to something that would touch you.
4. Find the sample and the extent. Look for the number of files reviewed, the number with violations, and whether the order requires a look-back of the full book.
5. Find the remedy. Restitution to consumers and a corrective action plan matter more to you than the fine.
6. Check for repeats. Does the order mention earlier exams or prior orders?
7. Check how specific the corrective terms are. The NAIC's best-practices guidance for multistate settlements, set out in the handbook chapter, says required corrective action should be defined with specificity, include a time for completion, and be reasonably calculated to undo past harm where possible and prevent future violations. Vague terms with no deadline are weaker than a dated look-back with a reporting date.

For a deeper walk through penalty language, see reading a regulatory action: consent orders, fines and what they mean.

How much weight one action deserves

Context decides. Say a hypothetical insurer paid a $250,000 penalty in one state after an exam of its claims handling. If that company writes $2 billion in premium nationally, the penalty is a small fraction of its business, and the question is whether the practice was systemic. If the order finds that a software rule underpaid a type of claim in all states, it matters a lot, even with a small fine. If it finds clerical errors in three files, it matters little.

Compare these cases:

Also compare against complaint data. A company with several orders about claims delay and an elevated complaint index has two independent signals pointing the same direction. A company with one old order and a clean complaint record has little to explain. The tools for that comparison are in The NAIC complaint index: how to look up an insurer and the small-numbers problem in insurer complaint ratios.

How to search for actions on an insurer you are considering

1. Get the exact company name. Look at a quote or policy document for the legal entity, then use the NAIC's Consumer Insurance Search to confirm the name and code. That page notes a company may have subsidiaries with different names.
2. Go to your state department's site. Look for market regulation actions, enforcement actions, orders or market conduct reports. Missouri publishes a searchable list. Other departments organize this differently, and some post orders under press releases or hearings sections.
3. Search under each affiliated entity. A group may have several companies in your state; the order may name only one.
4. Search a neighboring pattern. If your state's site has nothing, check states where the insurer is large, since a multistate action may be listed by the lead state.
5. Ask the department. Your state insurance department's consumer line can tell you whether public actions exist and where they are posted. The state car insurance requirements lookup can help you find your state's regulator.
6. Check dates. A 2015 order may have been cured long ago; a 2026 order may be current.

If you cannot find any actions, that proves little. Many exams end quietly, and some departments post less than others.

Common questions

Does a fine mean I should avoid an insurer?

Not by itself. Look at what the order says, how long ago it was, how many people were affected and whether it was fixed. Weigh it with complaint data and financial strength, as described above.

Will I get money from a market conduct order?

Only if the order includes restitution and you were among the affected policyholders. Fines go to the state. If a company must review past claims, it usually contacts affected customers, but you can also ask your department whether an order applies to you.

Who decides what penalties an insurer faces?

The state department or its commissioner, under that state's statutes. The NAIC coordinates multistate matters but does not impose penalties; participating states decide their own responses.

Are market conduct reports public?

Often the final order or report is; exam work papers and negotiations often are not. The NAIC's handbook guidance says final multistate settlement orders should not be confidential once final, unless the law requires otherwise. State law governs what is posted.

Can a policyholder use a regulatory action in a lawsuit?

That is a question for a licensed attorney. A regulator's finding and a court's finding are different things, and the effect of an order depends on the state and the facts.

Key takeaways

• A market conduct exam reviews how an insurer treats customers (claims, underwriting and rating, sales, complaint handling); a financial exam reviews whether it can pay.
• States run exams under their own law; the NAIC provides the handbook, the data systems and the forums for multistate cases.
• Orders end three ways: no violations, a cure order, or a settlement with fines, restitution and corrective action.
• The fine is rarely the most important number. Look for the practice, the sample, the look-back and the repeat history.
• Search by exact legal entity on your state department's site, and weigh any action against company size, recency and complaint data.