Study guide
17.1 State Regulation, Licensing, and the McCarran-Ferguson Act
Arkansas Property & Casualty Insurance State
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1 Standalone Coverage Map
Standalone Coverage Map
2 Introduction: Arkansas Property & Casualty Insurance Exam Overview
Arkansas Property & Casualty Exam Overview
3 National Portion: Insurance Fundamentals
1.1 Risk, Hazards, Perils, and the Law of Large Numbers 1.2 Insurable Interest, Indemnity, and Other Insurance Principles 1.3 Insurance Contract Law and Elements 1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions 1.5 Parties, Agents vs. Brokers, and Authority
4 National Portion: Property Insurance Concepts
2.1 Causes of Loss / Named-Peril vs. Open-Peril 2.2 Valuation: ACV, Replacement Cost, and Functional Value 2.3 Coinsurance and the Coinsurance Formula 2.4 Deductibles, Limits, and Loss Settlement 2.5 Common Property Policy Conditions and Clauses
5 National Portion: Dwelling Policies (DP)
3.1 Dwelling Policy Forms DP-1, DP-2, DP-3 3.2 Dwelling Coverages A-E and Other Coverages 3.3 Dwelling Perils, Conditions, and Endorsements 3.4 Mobile Home and Specialized Dwelling Coverage
6 National Portion: Homeowners Policies - Forms & Section I
4.1 Homeowners Forms HO-2 through HO-8 and Eligibility 4.2 Section I Coverages A-D and Additional Coverages 4.3 Section I Perils Insured Against and Exclusions 4.4 Replacement Cost vs. ACV and Loss Settlement in Homeowners
7 National Portion: Homeowners Policies - Section II & Endorsements
5.1 Section II Coverages E (Liability) and F (Medical Payments) 5.2 Homeowners Conditions and Duties After Loss 5.3 Common Homeowners Endorsements (scheduled property, water backup, ordinance or law)
8 National Portion: Personal Auto Policy - Liability & Injury
6.1 Personal Auto Policy Structure and Eligibility 6.2 Part A Liability and Supplementary Payments 6.3 Part B Medical Payments 6.4 Part C Uninsured/Underinsured Motorists
9 National Portion: Personal Auto Policy - Physical Damage & Duties
7.1 Part D: Coverage for Damage to Your Auto 7.2 Exclusions and Part E: Duties After an Accident 7.3 Part F: General Provisions, Endorsements, and No-Fault Concepts
10 National Portion: Liability Insurance Concepts
8.1 Negligence, Torts, and Legal Liability 8.2 Defenses, Damages, and Vicarious Liability 8.3 Occurrence vs. Claims-Made Triggers 8.4 Bodily Injury, Property Damage, and Personal/Advertising Injury
11 National Portion: Commercial Property Insurance
9.1 Commercial Package Policy Structure and Common Policy Conditions 9.2 Building and Personal Property Coverage Form (BPP) 9.3 Causes of Loss Forms (Basic, Broad, Special) 9.4 Business Income and Extra Expense 9.5 Commercial Property Endorsements and the BOP
12 National Portion: Commercial General Liability - Coverages
10.1 CGL Coverage A: Bodily Injury and Property Damage Liability 10.2 CGL Coverage B: Personal and Advertising Injury, Coverage C: Medical Payments 10.3 Who Is an Insured and Supplementary Payments
13 National Portion: Commercial General Liability - Limits, Triggers & Exclusions
11.1 CGL Limits of Insurance and Aggregates 11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates 11.3 Key CGL Exclusions and Endorsements
14 National Portion: Commercial Auto Insurance
12.1 Business Auto Coverage Form and Covered Auto Symbols 12.2 Commercial Auto Liability and Physical Damage 12.3 Motor Carrier / Trucking and MCS-90 12.4 Garage Coverage Form and Garagekeepers 12.5 Commercial Auto Endorsements
15 National Portion: Workers Compensation
13.1 Workers Compensation Statutory Background and Benefits 13.2 Part One (Workers Comp) and Part Two (Employers Liability) 13.3 Premium Basis, Experience Modification, and Classification 13.4 Other States, USL&H, and Federal Acts 13.5 Workers Comp Exclusions and Endorsements
16 National Portion: Other Commercial Lines - BOP, Crime & Marine
14.1 Businessowners Policy (BOP) in Depth 14.2 Crime and Fidelity Coverage 14.3 Inland Marine and Nationwide Marine Definition 14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)
17 National Portion: Other Commercial Lines - Specialty & Professional
15.1 Farm and Agricultural Coverage 15.2 Commercial Umbrella and Excess Liability 15.3 Professional Liability and Errors & Omissions 15.4 Directors & Officers and Employment Practices Liability
18 National Portion: Other Commercial Lines - Surety, Flood & Specialty
16.1 Surety and Fidelity Bonds 16.2 National Flood Insurance Program (NFIP) 16.3 Cyber, Aviation, and Other Specialty Lines
19 National Portion: Insurance Regulation & Market Conduct
17.1 State Regulation, Licensing, and the McCarran-Ferguson Act 17.2 Rates, Forms, Solvency, and Guaranty Associations 17.3 Producer Authority, Fiduciary Duty, and Company Operations
20 National Portion: Ethics & Unfair Trade Practices
18.1 Unfair Trade Practices and Unfair Claims Settlement 18.2 Producer Ethics, Errors & Omissions Exposure, and Fiduciary Conduct 18.3 Privacy, Fraud, and Consumer Protection
21 Chapter 1: Arkansas P&C Insurance Regulation & Licensing
1.1 Arkansas Insurance Department 1.2 Arkansas P&C Producer Licensing Requirements 1.3 Arkansas Producer Responsibilities
22 Chapter 2: Arkansas Property Insurance
2.1 Arkansas Homeowners Insurance 2.2 Arkansas Commercial Property Insurance
23 Chapter 3: Arkansas Casualty & Auto Insurance
3.1 Arkansas Auto Insurance Requirements 3.2 Arkansas Liability Insurance 3.3 Arkansas Workers' Compensation Insurance
24 Chapter 4: Arkansas Ethics & Professional Conduct
4.1 Ethical Practices and Consumer Protection
17.1 State Regulation, Licensing, and the McCarran-Ferguson Act
Key Takeaways Explain This Topic AI
Insurance is regulated primarily by the STATES; Paul v. Virginia and McCarran-Ferguson established this framework.
McCarran-Ferguson (1945) gives a LIMITED federal antitrust exemption only to the extent the business is state-regulated, and never shields boycott, coercion, or intimidation.
The Commissioner enforces and licenses; the legislature enacts the insurance code; the Commissioner issues regulations under it.
The NAIC drafts model laws and promotes uniformity but has NO direct regulatory or enforcement authority.
Nonresident licensing works through reciprocity; CE (commonly 24 hours/2 years with ethics) maintains the license.
Last updated: June 2026
The Source of Insurance Authority
Insurance in the United States is regulated primarily at the state level, not the federal level. This is the single most-tested concept on the national portion. The reason traces to two landmark events you must be able to identify on the exam.
In Paul v. Virginia (1869), the U.S. Supreme Court held that issuing an insurance policy is not interstate commerce, leaving regulation to the states. In United States v. South-Eastern Underwriters Association (1944), the Court reversed course, ruling that insurance transacted across state lines is interstate commerce and therefore subject to federal antitrust law.
The McCarran-Ferguson Act of 1945
Congress responded to the South-Eastern Underwriters decision by passing the McCarran-Ferguson Act (1945) . Memorize its effect precisely, because distractors twist it:
It returned regulatory authority over insurance to the states .
It granted insurers a limited exemption from federal antitrust laws (Sherman Act, Clayton Act) to the extent the business is regulated by state law.
The exemption does not cover boycott, coercion, or intimidation.
The exam loves the phrase "to the extent regulated by state law." If a state fails to regulate a practice, the federal antitrust exemption does not apply to it.
Federal Touchpoints You Still Must Know
Though states lead, several federal laws reach insurance and appear on the national portion. The Gramm-Leach-Bliley Act (GLBA, 1999) sets privacy standards: insurers must give an initial and annual privacy notice and let consumers opt out of certain information sharing. The Fair Credit Reporting Act (FCRA) governs use of consumer/credit reports in underwriting and requires adverse-action notices . The Fraud and False Statements Act (18 U.S.C. 1033/1034) bars anyone convicted of a felony involving dishonesty or breach of trust from working in insurance without written consent of the Commissioner.
OFAC rules prohibit transacting with sanctioned parties. These overlay, not replace, state law.
The Commissioner and the Department of Insurance
Each state has an Insurance Commissioner (sometimes titled Director or Superintendent). In most states the Commissioner is appointed by the governor; in a minority, the office is elected . The Commissioner's powers are exam staples:
- Power What it covers
- Examination Audit insurer books, typically every 3–5 years
- Licensing Issue, deny, suspend, revoke producer and company licenses
- Rulemaking Adopt regulations implementing the insurance code
- Enforcement Issue cease-and-desist orders, levy fines, hold hearings
- Receivership Place an insolvent insurer into rehabilitation or liquidation
The Commissioner does not write the insurance code itself — the legislature enacts statutes; the Commissioner issues regulations under them.
The NAIC
The National Association of Insurance Commissioners (NAIC) is not a regulator and has no direct enforcement power. It is a voluntary association of the chief insurance officials of the 50 states, D.C., and U.S. territories. Its role is to draft model laws and regulations that states may adopt, and to promote uniformity. A common trap: the NAIC cannot license a producer, fine an insurer, or revoke a certificate of authority — only a state can.
Producer Licensing
A producer (agent or broker) must hold a license in each line transacted (Property, Casualty, often combined as P&C). Typical national requirements:
Complete pre-licensing education (hours set by state).
Pass the licensing exam (national + state-law portions).
Submit a license application and fee; many states require fingerprinting and a background check.
Nonresident licensing relies on reciprocity : a producer licensed in good standing in a home state may obtain a nonresident license in another state, usually without retaking an exam.
Maintain the license through continuing education (CE) — commonly 24 hours per 2-year cycle, including an ethics component.
A license generally must be renewed before expiration; transacting on a lapsed license is an unfair practice.
Grounds for License Action and the Hearing Process
The Commissioner may deny, suspend, or revoke a license for cause: providing false information on the application, misappropriating premiums, conviction of a felony, fraudulent or dishonest practices, or violating any provision of the insurance code. Before most actions the producer is entitled to due process — written notice , an opportunity for a hearing , and the right to appeal an adverse order to the courts.
A producer must also notify the Commissioner of certain events within a stated window (commonly 30 days ): a change of address, a criminal prosecution, or administrative action taken against the license in another state. The exam frequently tests this reporting duty and its short deadline.