Which of the following has primary responsibility for regulating the insurance industry?

• A. The federal government
• B. The states
• C. The NAIC
• D. The Consumer Financial Protection Bureau

Answer: (B)

Regulation of insurance is primarily handled by state governments. Each state's department of insurance licenses agents, approves policy forms and rates, and monitors the solvency and conduct of insurers operating within that state to protect residents. This state-centered approach grew from the belief that insurance markets vary by state and benefit from local oversight.

The NAIC, a voluntary association of state regulators, helps coordinate standards and share information, but it doesn’t itself license or directly regulate insurers. The federal government plays a much more limited role in insurance regulation, mainly addressing specific federal laws or interstate issues rather than serving as the primary regulator. The Consumer Financial Protection Bureau focuses on consumer protections for financial products like loans and credit, not on regulating insurance.