California State Regulations & NAIC Insurance Law
Licensing
Any individual applying for a California resident producer’s license must be at least 18 years old and must be a resident of California before submitting an application.
Pre-licensing course and exam
Since January 1, 2026, an applicant for a California property, casualty, life, accident and health, or personal lines license must complete a 12-hour course of study on ethics and the Insurance Code (Cal. Ins. Code § 1749).
A candidate may take no more than 10 license qualification examinations of the same type in any 12-month period (Cal. Ins. Code § 1682).
Fingerprints/background check
California requires fingerprints and a state and federal criminal history check for applicants for every major producer license (Cal. Ins. Code § 1652).
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 California nonresident license without taking California’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
Under the NAIC’s model act, the regulator may also issue one in any other circumstance where it finds that the public interest will best be served.
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.
California issues no general temporary license. Instead it issues a certificate of convenience, for example to let someone carry on the business of a licensee who has died, for up to one year after the death (Cal. Ins. Code § 1693).
Military service
A California licensee who enters military service keeps the license in force during that service and until the end of the license year in which the licensee is released, but not less than six months after release (Cal. Ins. Code § 1722).
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.
A California producer license runs for a two-year term, ending on the last day of the month in which the license was first issued (Cal. Ins. Code § 1630).
A producer who misses the deadline and lets the license lapse may be able to reinstate it without retaking the examination.
An expired California license may still be renewed up to one year after its expiration date, on payment of the renewal fee plus a delinquent fee equal to the one-year license fee (Cal. Ins. Code § 1718).
Continuing education
All states, including California, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license. Many states also require continuing education of other licensees, such as adjusters or title or bail bond agents, while exempting producers who hold only certain limited lines; each state’s law says which. Individuals licensed in the state of California must complete continuing education before renewing their license. The number of hours required is set by state law and published by the state insurance department.
Notice of change of name or address
A California licensee must notify the Commissioner immediately of any change of email, residence, principal business or mailing address (Cal. Ins. Code § 1729).
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 Department of Insurance to conduct business in California. 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 that has been authorized to conduct insurance business in California must maintain minimum standards as a corporation. 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 California, a certificate of authority is issued for an indefinite term, and its holder must continue to comply with the requirements the Insurance Code sets for its business; when the Commissioner determines, after notice and a hearing, that an insurer is in default for failing to comply with the laws governing it, the Commissioner may order it to comply within 30 days, and the certificate may be revoked if it does not (Cal. Ins. Code §§ 700(c), 701).
Duties of the Insurance Commissioner
The California Insurance Commissioner is an elected state executive position in the California state government. Insurance Commissioners are elected for four-year terms at the same time as the Governor during federal midterm election years. Like all elected California executive officials, the Insurance Commissioner may not serve more than two terms.
The Commissioner oversees the California Department of Insurance, which regulates the state’s insurance industry. The Department of Insurance is charged with licensing insurance companies and reviewing their financial statements, establishing rate regulations, investigating consumer complaints, and punishing insurers with fines or penalties for regulatory noncompliance.
The Commissioner is responsible for establishing and enforcing regulations in the California 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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The Commissioner must examine every insurer admitted in California at least once every five years (Cal. Ins. Code § 730).
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Audit the books and records of any resident producer as frequently as necessary. Under the NAIC’s examination model, the regulator may examine any person subject to its authority, nonresident producers included, as often as it considers appropriate.
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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. Under the NAIC’s model act, the ground is broader: providing incorrect, misleading, incomplete or materially untrue information in the license application.
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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, of a misdemeanor specified by the insurance laws, or of a public offense involving fraud or dishonesty in accepting, holding or paying money or property (Cal. Ins. Code § 1668(m)).
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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 California. Under the NAIC’s model act, a license denied in another state is also a ground.
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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. However, the producer must 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 California law, and may ask a court to review the final order.
A licensee served with an accusation has 15 days to file a notice of defense requesting a hearing (Cal. Gov. Code § 11506, applied by Cal. Ins. Code § 1738).
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.
In a license disciplinary proceeding, the Commissioner may let a licensee pay a monetary penalty instead of serving a suspension. The statute sets four limits on that penalty: $4,000 for each offense, $20,000 for all the offenses in one proceeding, 30% of the licensee’s gross commissions in the preceding calendar year, and the amount shown to have been received and kept in violation of the code, and the Commissioner need not apply the one that yields the smallest penalty (Cal. Ins. Code § 1748).
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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Unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form.
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Failing, in the case of claims denials or offers of compromise settlement, to promptly provide a reasonable and accurate explanation of the basis for such actions.
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Refusing to pay claims without conducting a reasonable investigation.
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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 or settling a claim for less than the amount a reasonable person would believe the insured or beneficiary was entitled to by reference to written or printed advertising material accompanying or made part of an application.
Policy forms
Insurers file their policy forms with the Commissioner.
A California disability (health) policy may not be issued until its form has been filed with the Commissioner, and the form is treated as approved once 120 days pass without notice from the Commissioner, or earlier on written approval (Cal. Ins. Code § 10290).
Under the usual conformity rule, which many states’ insurance codes write into law, a policy provision that conflicts with state law does not make the policy invalid: the policy is read as amended to conform to the law.
The interest rate an insurer may charge on a life insurance policy loan is also limited by state 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.
A California agent or broker must keep the records of each insurance transaction for at least five years after the policy expires or is canceled (10 Cal. Code Regs. § 2190.2).
Fraudulent producer representation
An insurance producer who represents to the public that they are licensed to conduct insurance business in California, but has not passed the appropriate licensing examination, is in violation of regulation. This includes any public communication, such as advertisements, letterheads, circulars, business cards, and other methods of representation.
A producer found guilty of conducting business in California 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. Under the NAIC’s model act, any estimate, illustration or statement that misrepresents a policy’s benefits, advantages, conditions or terms is an unfair trade practice when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice.
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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 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. Under the model act, such a statement is an unfair trade practice when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice. Some state laws adopt this condition, and others reach a single such statement. In California, the Insurance Code’s list of unfair practices reaches such a statement made before the public “in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatsoever” when it is one “which is known, or which by the exercise of reasonable care should be known, to be untrue, deceptive, or misleading” (Cal. Ins. Code § 790.03(b)).
Defamation
Defamation of an insurer is an unfair trade practice under 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 such insurer. Some states’ laws reach further, to a statement calculated to injure any person engaged in the business of insurance. Spreading an untrue rumor that a competing insurer is about to fail is the classic example. In California, a false statement about an insurer’s finances is an unfair practice as a misrepresentation: the Insurance Code’s list of unfair practices includes “making any misleading representation or any misrepresentation as to the financial condition of any insurer” (Cal. Ins. Code § 790.03(a)).
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 any information that involves inaccurate material facts or false statements on an application for insurance is in violation of the state’s unfair trade practices law. The rule is not limited to licensed producers: under the NAIC’s model act, it is an unfair trade practice for an insurer or any person engaged in the business of insurance to make false or fraudulent statements or representations on or relative to an application for a policy, for the purpose of obtaining a fee, commission, money or other benefit from any provider or individual person.
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.
California does not prohibit an agent or broker from rebating part of a commission to a client: Proposition 103, approved by California voters in 1988, authorized it (Cal. Ins. Code § 750(d)).
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.
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.
Rebating
California does not prohibit an agent or broker from rebating part of a commission to a client: Proposition 103, approved by California voters in 1988, authorized it (Cal. Ins. Code § 750(d)).
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
Making a misrepresentation to a policyholder, or a misleading comparison of insurers or policies, to induce the policyholder to lapse or surrender an existing policy is a violation of the law. Any written or oral statements used to induce the lapse, termination, exchange, or surrender of an insurance contract based on inaccurate information is prohibited.
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. In California, the Insurance Code’s list of unfair practices includes “making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce the policyholder to lapse, forfeit, or surrender his or her insurance” (Cal. Ins. Code § 790.03(a)), and a separate section forbids “any representation or comparison of insurers or policies to an insured which is misleading, for the purpose of inducing or tending to induce him or her to lapse, forfeit, change or surrender his or her insurance” (Cal. Ins. Code § 781(b)).
Unfair marketing practices
The Department of Insurance is responsible for establishing minimum standards for the full and fair disclosure of policy content. The Department 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 parts of the Glass-Steagall Act of 1933 that kept commercial banks and securities firms apart, and allowed the consolidation of commercial banks, investment institutions and insurance companies. GLBA established a framework of responsibilities of 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(c)).
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.
Under California’s insurance privacy law, an authorization signed with an application, a reinstatement or a request to change benefits is valid for no longer than 30 months for life, health or disability insurance, or one year for property or casualty insurance (Cal. Ins. Code § 791.06).
Under the NAIC’s Insurance Information and Privacy Protection Model Act, a person told of an adverse underwriting decision may ask in writing, within 90 business days of the notice, for the specific reasons for it, which must be given within 21 business days of the request.
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
- Must give the caller’s name, the name of the company the call is made for, and a telephone number or address at which that company can be contacted
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
Life and health insurance guaranty association
Every state has a life and health insurance guaranty association that protects policyholders and beneficiaries when a member insurer becomes insolvent, by continuing coverage and paying covered claims under life insurance, health insurance and annuity contracts, up to limits set by law. Insurers licensed to write the covered lines in the state must belong to it as a condition of doing business there, and it is funded by assessments on its members.
For life insurance and annuities, the California Life and Health Insurance Guarantee Association pays no more than 80% of what the insolvent insurer owed under each policy or contract, and, for any one life, no more than $300,000 in life insurance death benefits, of which no more than $100,000 in net cash surrender and withdrawal values, or $250,000 in the present value of annuity benefits, with $300,000 in all. For health insurance it pays no more than $200,000 for any one individual, a figure adjusted for changes in health care costs since January 1, 1991 (Cal. Ins. Code § 1067.02).