Massachusetts State Regulations & NAIC Insurance Law
Licensing
To apply for a Massachusetts resident producer’s license, you must:
- Be at least 18 years old
- Be a resident of Massachusetts before you submit your application
Pre-licensing course and exam
Massachusetts does not have specific pre-licensing requirements, but an applicant must pass the examinations for the lines of authority applied for; the Division of Insurance recommends, but does not require, a course of study before the examination (Mass. Gen. Laws ch. 175, § 162L).
Fingerprints/background check
The Commissioner reviews an applicant’s background before issuing a license, and many states require applicants to submit fingerprints for a state and FBI criminal history check as part of the application.
Controlled business
Controlled business is insurance written on the producer’s own life, property or interests, or on those of the producer’s family, employer or a business the producer controls. A producer may insure themselves and their family, but a license exists to sell insurance to the public, so states generally restrict obtaining or using a license principally to write controlled business.
Non-resident license
A producer licensed in another state can obtain a Massachusetts nonresident license without taking Massachusetts’s examination. Under the NAIC’s Producer Licensing Model Act, which most states have adopted in some form, a nonresident receives the license if the person:
- Is currently licensed as a resident, and in good standing, in the home state
- Has applied (the home-state application or the Uniform Application) and paid the fees
- Lives in a home state that grants nonresident licenses to residents of this state on the same basis (reciprocity)
Under the same model, a producer who moves to another state files a change of address, with certification from the new home state, within 30 days. A licensed producer who moves into a state applies for a resident license there within 90 days and does not repeat prelicensing education or the examination for lines already held.
Temporary license
Most states allow the insurance regulator to issue a temporary license, without an examination, when one is needed to keep an insurance business serviced. Typical cases are:
- The surviving spouse or personal representative of a producer who dies or becomes disabled, to allow time to sell the business or train new people
- A member or employee of a business entity producer, on the death or disability of its designated producer
- The designee of a producer entering active military service
The regulator may limit what a temporary licensee may do and may require a licensed sponsor who takes responsibility for the temporary licensee’s acts.
Massachusetts may issue a temporary producer license for up to 180 days without an examination, where it is necessary to service an insurance business — for example after a licensed producer dies or becomes disabled (Mass. Gen. Laws ch. 175, § 162Q(a)).
Military service
Under the NAIC’s model act, a producer who cannot meet license renewal requirements because of military service, or because of another extenuating circumstance such as a long-term medical disability, may request a waiver of those requirements and of any examination, fine or sanction for missing them.
Renewal and reinstatement
A producer license stays in effect only while the producer renews it on schedule: paying the renewal fee and completing continuing education by the due date.
Each state sets its own renewal cycle.
A producer who misses the deadline and lets the license lapse may be able to reinstate it without retaking the examination.
Under the NAIC’s model act, a lapsed license may be reinstated within 12 months of the renewal due date, for a penalty of double the unpaid renewal fee. Each state sets its own window and fee, and after the window closes the person must qualify for a new license.
Continuing education
All states, including Massachusetts, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license. Individuals licensed in Massachusetts must complete 60 hours of approved instruction before their first license renewal, and 45 hours for each subsequent 36-month renewal period. Three of those hours must be Massachusetts Approved Ethics (MAE), counted within the total rather than in addition to it. The hours may be earned in any line of insurance the producer is licensed for.
Notice of change of name or address
Under the NAIC’s model act, the licensee reports a change of address to the regulator within 30 days of the change.
The model also requires a producer to report to the regulator within 30 days any administrative action taken against the producer in another state or by another government agency, counted from the final disposition, and any criminal prosecution in any jurisdiction, counted from the initial pretrial hearing date. A producer who does business under any name other than their legal name must notify the regulator before using it.
Company regulations
An insurance company must be authorized by the Division of Insurance to conduct business in Massachusetts. To receive a certificate of authority, the company applies to the Commissioner and files its charter or articles of incorporation, financial statements showing that it meets the state’s capital and surplus requirements, and the other documents and fees the state requires.
Capital and surplus requirement
A company authorized to conduct insurance business in Massachusetts must meet minimum corporate standards. The certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required. In Massachusetts, the Commissioner must revoke the license of a foreign company whose capital has been reduced below the required amount (Mass. Gen. Laws ch. 175, § 5), while a domestic stock company other than a life company whose capital is impaired by a quarter or more is first given three months to make it good (ch. 175, § 6).
Medigap policies
To reduce confusion about the many types of Medicare supplement policies available, federal law requires national standardization of Medigap policies. Insurers must offer a limited number of standardized Medigap plans developed by the NAIC.
Currently, the available plans are A, B, C, D, F, G, K, L, M, and N. Plans E, H, I, and J have been eliminated. In addition, Plans C and F are not available to individuals who became newly eligible for Medicare on or after January 1, 2020.
Plan A includes the “core” benefits (Parts A and B co-payments, 365 additional days of hospitalization, and the first 3 pints of blood). The lettered plans are the national standard, but Massachusetts is one of only three states whose Medigap policies are standardized in a different way: Massachusetts’s are a Core Plan and a Supplement 1A Plan, with the Supplement 1 Plan available only to people eligible for Medicare before January 1, 2020 (Centers for Medicare & Medicaid Services, Choosing a Medigap Policy).
A Buyer’s Guide and an Outline of Coverage are delivered at the time of application, prior to accepting any premium payment.
Duties of the commissioner of insurance
The Massachusetts Commissioner of Insurance is the head of the Division of Insurance, which is part of the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR). The Division of Insurance regulates the insurance industry and protects consumers. The Commissioner of Insurance is appointed by, and serves at the pleasure of, the Governor.
The Commissioner is responsible for establishing and enforcing regulations in the Massachusetts insurance market in a manner that protects consumers and encourages economic development.
Those duties include:
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Investigate all claims and complaints of legal violations relating to insurance.
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If the Commissioner finds that laws have been violated, the findings and supporting documents may be referred for criminal prosecution.
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Monitor transactions of all companies including domestic, foreign, and alien insurance companies.
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Examine the financial condition of insurers; the NAIC’s model examination law calls for every insurer to be examined at least once every five years. Massachusetts examines each domestic company, and any foreign company applying for admission or already admitted to do business in the commonwealth, at least once in every five years (Mass. Gen. Laws ch. 175, § 4(2)).
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Audit the books and records of any resident producer as frequently as necessary.
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Collect all fees associated with producers and insurers.
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Determine and administer fines associated with violations for insurers and producers.
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Issue reports pertaining to the suspension and revocation of licenses of producers and certificates of authority for insurers.
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Approve documentation used by insurance companies such as forms and rates.
Suspend, revoke or non-renew
The Commissioner has the authority to suspend, revoke, or refuse to renew a license for:
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Providing false information on the application for an insurance license.
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Omitting any relevant information on an application that would have disqualified the individual from being eligible to receive a license.
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Being found guilty of a violation or the noncompliance of insurance regulations and laws…
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Committing fraud while attempting to obtain an insurance license.
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Improperly withholding, misappropriating or converting any money or property received in the course of doing insurance business.
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Providing false information in reference to the terms and conditions of an insurance contract.
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Having been convicted of a felony.
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Having admitted or been found to have committed any insurance unfair trade practice or fraud.
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Having engaged in activities of a fraudulent nature which allowed the person to involve themselves in dishonest, coercive, untrustworthy, and financially irresponsible practices.
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Having had a prior insurance license revoked or suspended in a state other than Massachusetts.
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Using another person’s identity and forging their name on an insurance application.
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Being found guilty of using unethical practices or cheating on an examination for an insurance license.
Cease and desist
If the Commissioner finds that a producer has violated the state’s insurance laws, the Commissioner may order the producer to cease and desist. Receiving a cease and desist order does not mean the producer’s registration has been suspended or revoked, but it does require the producer to stop or limit the activity addressed in the order.
Hearing and penalties
A person facing action by the Commissioner is entitled to notice and an opportunity for a hearing, within time limits set by Massachusetts law, and may ask a court to review the final order. In Massachusetts, unfair practice charges come with a notice of a hearing set at least 21 days after service; only after the hearing may the Commissioner order the person to cease and desist, fine up to $1,000 for each act or practice, and suspend the license, or revoke it for repeated violations (Mass. Gen. Laws ch. 176D, §§ 6, 7). The person may petition the Supreme Judicial Court for review within 30 days of service of the order (ch. 176D, § 8).
A violation of the insurance laws can bring a civil penalty in addition to action against a license. State law sets the maximum, usually per violation and often with a cap on the total, and a higher tier commonly applies to a violation that was knowing or flagrant. Some violations are also crimes.
Unfair claims settlement practices
Under the NAIC’s model act, these practices are violations when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice.
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The intentional obstruction and delay of claims payment or the delay of a claims investigation is a violation of regulation.
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Neglecting to provide a prompt response and written explanation of insurance policy terms, conditions, and laws related to the contract are examples of unfair claims settlement practices.
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Failure to provide claims without launching a thorough investigation is a violation of regulation.
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Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of regulation.
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Denying a claim without conducting a thorough investigation.
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Attempting to settle a claim for less than fair market value.
Policy forms
Insurers file their policy forms with the Commissioner.
Depending on the line of insurance and the form, a state may require approval before a form is used, often with a period after which a filing that has not been acted on is deemed approved, or may allow the form to be used as soon as it is filed (“file and use”). In Massachusetts, a policy form may not be delivered to more than fifty policyholders until it has been on file with the Commissioner for 30 days, unless approved sooner, and not if the Commissioner objects within those 30 days (Mass. Gen. Laws ch. 175, § 2B).
If a policy provision conflicts with Massachusetts law, the policy is read as amended to conform to the law.
Record maintenance
A producer keeps records of each transaction (the policies placed, the insureds, the premiums received and any changes) and makes them available for the Commissioner’s inspection.
Fraudulent producer representation
An insurance producer who represents to the public that they are licensed to conduct insurance business in Massachusetts, but has not passed the appropriate licensing examination, is in violation of regulation.
Any means of public communication is included, such as advertisements, letterheads, circulars, business cards, and other methods of representation.
A producer found guilty of conducting business in Massachusetts in any line of insurance for which they are not properly licensed may have any other insurance license suspended or revoked.
Misrepresentation
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Misrepresentation involving the creation or distribution of policies, quotes, and illustrations designed to provide inaccurate information about the terms and conditions of a policy is prohibited.
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Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.
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Providing inaccurate or incomplete information for the purpose of inducing, or tending to induce, the lapse, exchange, conversion, forfeiture, or surrender of a policy is a violation as well (twisting).
False advertising
Making, publishing or circulating an advertisement, announcement or statement about the business of insurance that is untrue, deceptive or misleading is an unfair trade practice under state law, based on the NAIC’s model act. The medium does not matter: the rule reaches newspapers, magazines, radio and television, and also notices, circulars, pamphlets, letters, posters and any other way of placing the statement before the public. The model act’s test is whether the statement is untrue, deceptive or misleading, not whether the person meant to deceive.
Defamation
Defamation of an insurer is an unfair trade practice under state law, based on the NAIC’s model act: making, publishing or circulating an oral or written statement that is false, or maliciously critical of or derogatory to the financial condition of an insurer, and that is calculated to injure that insurer or any other person engaged in the business of insurance. Spreading an untrue rumor that a competing insurer is about to fail is the classic example.
Boycott, coercion and intimidation
Entering into an agreement to commit, or by concerted action committing, any act of boycott, coercion or intimidation that results or tends to result in unreasonable restraint of, or monopoly in, the business of insurance is prohibited.
False financial statements
Any licensed producer who makes false statements containing inaccurate material facts, or who makes false statements on an application for insurance, is in violation of the state’s unfair trade practices law.
Illegal inducements
Offering anything of value not specified in the policy (money, a service, a favor or a gift) as an inducement to buy insurance is prohibited unless state law expressly allows it, and any agreement made as part of the sale must be written into the policy.
States differ on promotional gifts. The NAIC’s model act lets producers and insurers give customers non-cash gifts, meals or charitable donations up to an amount the state considers reasonable, as long as the gift is not conditioned on buying or renewing a policy and is offered without unfair discrimination. Each state sets its own limit. Massachusetts sets no dollar limit: an insurer, agent or broker may not give or offer anything of value not specified in the policy in connection with placing, negotiating or renewing it (Mass. Gen. Laws ch. 175, § 182).
Unfair discrimination
Unfair discrimination is treating people or risks that present the same hazard differently. The NAIC’s model act, on which state unfair trade practices laws are based, prohibits:
- Unfair discrimination between individuals of the same class and equal expectation of life in life insurance and annuity rates, dividends, benefits or terms
- Unfair discrimination between individuals of the same class and essentially the same hazard in health insurance premiums, benefits or terms
- Refusing, limiting or canceling coverage because of a person’s sex, marital status, race, religion or national origin
- In property and casualty insurance, refusing or limiting coverage solely because of a risk’s geographic location, unless sound underwriting and actuarial principles justify it, or solely because the applicant or insured is physically or mentally impaired
Many states also expressly forbid refusing or limiting coverage solely because a person is blind or partially blind. In Massachusetts, the rule covers every kind of policy: an insurer may not discriminate in issuing a policy or in its rates solely because of blindness or partial blindness, an intellectual disability or a physical impairment, unless the distinction rests on sound actuarial principles or actual experience (Mass. Gen. Laws ch. 175, § 193T).
Errors & omissions
Errors & Omissions (E&O) insurance is a type of professional liability insurance that protects insurance agents if they are sued for negligent performance of their duties. E&O covers negligence and unintentional mistakes that cause financial harm to clients. It does not cover intentional misconduct, criminal acts, or regulatory fines.
Children covered as dependents
Under the Affordable Care Act, a plan that offers dependent coverage must make it available to an adult child until age 26, whether or not the child is married, a student or financially dependent on the parent.
State law generally requires a policy that covers dependents to cover a newborn from the moment of birth and an adopted child from placement, and may let the insurer require notice and any added premium within a set period to continue the child’s coverage. Policies also generally continue coverage past the age limit for a dependent child who cannot support themselves because of a mental or physical disability that began before that age.
Rebating
Massachusetts licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.
Sharing commission
The splitting or sharing of commissions with a licensed producer is allowed. Both parties must be licensed in the line of business in which the proposed commission is to be split. Under the NAIC’s model act, a commission may also be paid to an insurance agency, or to a person who does not sell, solicit or negotiate insurance.
Twisting
Providing false information or expressing derogatory ideas about the financial conditions of a competitor company with the intent to lapse or surrender an existing policy is a violation of the law.
Under the NAIC’s model act, twisting is a misrepresentation made to induce a policyholder to lapse, forfeit, surrender, exchange or convert a policy. A false or maliciously critical statement about a competing insurer’s finances, made to injure it, is defamation.
Any written or oral statements used to induce the lapse, termination, exchange, or surrender of an insurance contract based on inaccurate information are prohibited.
Unfair marketing practices
The Division of Insurance is responsible for establishing minimum standards for the full and fair disclosure of policy content. The Division also requires the standardization and simplification of the terms used to describe insurance coverage.
Advertising may not involve the following:
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Any statement or implication that policies are approved, or that the financial condition of a company is endorsed, by any government agency or by any independent group, individual, organization or society, unless that is the fact.
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Any statements regarding advertising that are false or untrue in reference to the time frame in which claims are paid.
Gramm-Leach Bliley Act (GLBA)
This law repealed the Glass-Steagall Act of 1933, allowing consolidation of commercial banks, investment institutions, and insurance companies. GLBA established a framework of responsibilities for federal and state regulators for these financial industries. It permits financial services companies to merge and engage in a variety of new business activities, including insurance, while attempting to address the regulatory issues raised by such combinations.
McCarran-Ferguson Act
Federal law signed in 1945 in which Congress declared that the insurance industry would be regulated at the state level. Grants insurers a limited exemption from federal antitrust legislation. Since 2021 the exemption does not cover the business of health insurance, apart from narrow activities such as sharing historical loss data (15 U.S.C. § 1013©).
National Association of Insurance Commissioners (NAIC)
The U.S. standard-setting and regulatory support organization is created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA, 15 U.S.C. 1681) regulates consumer reporting agencies and the use of consumer reports, such as credit reports, MIB records and investigative reports, including in insurance underwriting.
- When an insurer requests an investigative consumer report, it must disclose that to the consumer within 3 days of the request
- When an insurer takes adverse action based on a consumer report, it must notify the consumer and identify the reporting agency. The consumer then has 60 days to request a free copy of the report and may dispute inaccurate information
Privacy Act of 1974
The federal Privacy Act of 1974 governs how federal agencies handle personal information. It does not apply to private insurers. An insurer’s use of an applicant’s personal information is governed by the FCRA, the Gramm-Leach-Bliley Act and state insurance privacy law.
In states that adopted the NAIC’s Insurance Information and Privacy Protection Model Act, an authorization to collect personal information signed with an application is valid for no more than 30 months for life, health or disability insurance and one year for property or casualty insurance. Massachusetts adopted the model for life, health and disability insurance only (Mass. Gen. Laws ch. 175I, § 2), where an authorization signed with an application is valid for no more than 30 months (ch. 175I, § 6).
Telemarketing
The National Do Not Call Registry is a list of telephone numbers whose owners do not want to receive telemarketing calls. Telemarketers may not call registered numbers without the person’s permission or an established business relationship, and unsolicited sales calls:
- May be made only between 8 a.m. and 9 p.m. in the recipient’s local time under federal rules; Massachusetts’s own law is narrower, barring an unsolicited sales call received between 8 p.m. and 8 a.m. local time at the consumer’s location (Mass. Gen. Laws ch. 159C, § 3)
- Must disclose the caller’s identity, the company the caller represents and that the purpose is a sale
CAN-SPAM
A commercial email must:
- Be identified clearly as an advertisement
- Carry accurate header information and a subject line that is not deceptive
- Include the sender’s valid physical postal address
- Offer a way to opt out, and the sender must honor an opt-out within 10 business days
Insurance guaranty association
Every state has a property and casualty insurance guaranty association that pays covered claims when a member insurer becomes insolvent. Insurers licensed to write the covered lines in the state must belong to it, and it is funded by assessments on its members.
Each state sets the most its association pays per claim. The NAIC’s model act sets $500,000 per claimant for most covered claims and $10,000 for the return of unearned premium.
MassHealth
While at the end of the day it is all Medicaid, states use their own names for their medical welfare programs. In Massachusetts, Medicaid is called MassHealth. For the purpose of the exam, MassHealth and Medicaid are interchangeable terms.
MassHealth is a state-administered health care program for those in financial need. It is funded by federal and state money.