Insurance regulation in a nutshell

ARTICLE V

Enforcement Actions Against Insurers

Section V.1.In General

If an insurer fails to comply with an insurance regulatory requirement in a state, it may be subject to one or more kinds of sanctions in an enforcement action brought by that state’s insurance regulator. The kinds of typically available sanctions are described in this Article

Section V.2.Monetary Penalties

An enforcement action may result in the offending insurer acknowledging the violation and paying a monetary penalty. A state may have a general penalty provision that applies to all violations of law⁷² but may also have penalties that may be imposed for specific violations of law.⁷³ A penalty may be imposed for each offense⁷⁴ or for each day a filing that is due is delayed.⁷⁵ For example, if an insurer issues a policy on a policy form that was supposed to be approved but was not, then each policy issued on the non-approved form may be a separate offense subject to a monetary penalty.

Section V.3.Injunctions

If the offending insurer does not voluntarily cease its actions, then a state insurance regulator may go to court and seek an injunction. In New York, the Superintendent of Insurance may maintain and prosecute, in the name of the people of the State of New York, an action against the offending insurer, its officers or directors, for the purpose of obtaining an injunction restraining the persons from doing any acts in violation of the provisions of the New York Insurance Law.⁷⁶ The court may grant the petition if it finds that a defendant is threatening or is likely to do any act in violation of the New York Insurance Law and that the violation will cause irreparable injury to the interests of the people of the State of New York.⁷⁷

Section V.4.License Non-Renewal

Another sanction that can be imposed in an enforcement action is non-renewal of an insurer’s license. For example, under New York law, the Superintendent of Insurance may refuse to issue or renew a domestic insurer’s license to do an insurance business in the state if, in her judgment, the refusal would “best promote the interests of the people of this state.”⁷⁸ In addition, the Superintendent of Insurance may refuse a license to domestic stock insurer if she finds, after notice and hearing, that any director of the insurer has been convicted of any crime involving fraud, dishonesty, or like moral turpitude, or is an untrustworthy person.⁷⁹