Insurance regulators run two broadly different kinds of examination. A financial examination asks whether the company can pay what it owes. A market conduct examination asks whether it is treating policyholders fairly.
The second is the one that produces findings about claims handling, and its reports are generally public.
What examiners look at
New York's Department of Financial Services describes the scope of a market conduct examination as covering company operations, complaint handling, marketing, claims, rate and form filings, and policyholder service.
California's Market Conduct Division describes its two bureaus — field claims, and field rating and underwriting — as examining licensed insurers for compliance with the state insurance code and regulations on rating, underwriting, and claim handling.
In practice this means examiners pull actual claim files and read them, comparing what happened against what the law requires.
How an examination runs
- The department issues a call letter setting out the scope of the examination and the timeline.
- The insurer produces documentation the examiners request — claim files, procedures, correspondence, complaint records.
- Examiners review a sample of files against the state's statutory and regulatory requirements.
- A report of findings is prepared, and the insurer is given the opportunity to respond before it is finalised.
- Corrective action follows where problems are identified, and in serious cases fines, restitution to policyholders, or other remedies.
Massachusetts describes the same arc: examine, report with recommended corrective actions where needed, and take administrative action — which can include fines and payments to customers — where problems are serious.
The sampling method is what makes these reports informative. Examiners do not read every file. They read a defined sample and report the violation rate found within it, which is why a report can state something as specific as a number of violations across a stated number of claims reviewed.
A worked example from the public record
In 2026, the California Department of Insurance announced an enforcement action against State Farm General Insurance Company following an expedited investigation into the handling of claims from the 2025 Los Angeles wildfires.
The department stated that Insurance Commissioner Ricardo Lara ordered a market conduct examination after receiving consumer complaints, and that the examination documented a pattern of unlawful conduct in more than half of the claims reviewed. Examiners reviewed a sample of 220 claims and identified 398 violations of state law. The department's filing alleged violations of the Unfair Insurance Claims Practices Act and related regulations, comprising those 398 violations plus 34 further violations identified from consumer complaints. Approximately 11,300 residential claims had been filed with the insurer relating to the fires.
That example shows every element of the process: complaints leading to an ordered examination, a defined sample, a stated violation count, and a formal enforcement filing.
Another, at a different scale
In February 2022, the Louisiana Department of Insurance announced it had fined an auto insurer the maximum amount of $350,000 following a market conduct examination that found 32 instances of improper activity or practices non-compliant with the state insurance code. The department stated the examination followed a high volume of complaints, and that violations were found across operations and management, complaint handling, underwriting and rating, and claims handling.
The scale is different but the structure is identical.
What the reports are useful for
Examination reports are published by many state departments. For a consumer they offer something unusual: a regulator's assessment of how an insurer actually behaves, based on files rather than on marketing.
Two cautions. Reports are historical, describing a period that may have ended some time ago, and corrective action may have followed. And an insurer with no published report is not thereby confirmed as compliant — it may simply not have been examined.
What we are not saying
We are not characterising any insurer's current practices. The findings described above are what the relevant departments stated publicly about specific examinations covering specific periods, and in the California matter the department described the action as a filing containing allegations.
What we are saying is that these examinations exist, that their reports are public in many states, and that they are one of the few sources of independent, file-level information about how an insurer handles claims.
Sources for this article
- California Department of Insurance — press release announcing enforcement action following the market conduct examination of wildfire claims handling, 2026; and its published description of the Market Conduct Division.
- Louisiana Department of Insurance — press release on the market conduct examination and fine, February 2022.
- New York Department of Financial Services — published description of examination types and scope.
- Massachusetts Division of Insurance — published description of its Market Conduct Section.
- NAIC — Market Regulation Handbook and Market Conduct Regulation topic page.
Financial versus market conduct, side by side
| Financial examination | Market conduct examination | |
|---|---|---|
| The question | Can the company pay what it owes? | Is it treating policyholders fairly? |
| What examiners read | Reserves, capital, investments, accounting | Claim files, complaint records, correspondence, procedures |
| Who benefits from the finding | All policyholders, through solvency | Individual policyholders, through handling standards |
| Typical cycle | Regular, on a set schedule in most states | Targeted, or scheduled depending on the state |
| Public availability | Reports generally published | Reports generally published |
Both matter, and they answer different questions. A financially strong insurer can still handle claims poorly, and the second examination is the one that would find it.
The scope of a claims examination
What examiners actually check inside a claim file is more specific than "was it handled well".
Typical review points
- Was the claim acknowledged within the state's required timeframe?
- Was the investigation commenced promptly?
- Was a decision issued within the required period after proof of loss?
- Where a delay occurred, was written notice given as required?
- Did any denial state a specific reason and cite the provision relied on?
- Was payment issued within the required period after settlement was agreed?
- Was interest paid where the state requires it on late payment?
- Were the correct policy provisions applied, and applied consistently?
- Was the settlement calculated correctly, including depreciation and deductible?
- Was the claimant given accurate information about appeal rights?
Notice that almost every one of these is a process question with a date attached. That is why regulators have real leverage here and much less on the question of whether a coverage decision was substantively correct — which is a contract matter for a court.
How sampling works, and why it matters
Examiners do not read every file. They select a sample, review it against the standards, and report the error rate within the sample.
This is what makes examination reports genuinely informative. A statement that examiners reviewed 220 claims and found 398 violations is a rate, not an anecdote — and a rate can be compared, projected, and acted on.
It also explains the language you see in these reports. A finding described as an "error rate exceeding the tolerance level" means the proportion of files with a given problem passed a threshold the examiners had set in advance, which is a considerably more rigorous statement than it sounds.
What follows a finding
| Outcome | What it means |
|---|---|
| Recommendation | The examiners identify a practice to improve; no penalty |
| Corrective action plan | The company must change specified practices, frequently with reporting |
| Restitution | Payments to affected policyholders — the part that reaches consumers directly |
| Civil penalty | A fine, subject to the state's statutory caps |
| Consent order | A negotiated resolution, frequently without an admission |
| Licence action | Suspension or restriction, in the most serious cases |
Restitution is the outcome worth watching for as a consumer. Where an examination finds systematic underpayment, the remedy frequently includes reopening affected claims — and that reaches people who never complained and never knew anything was wrong.
How to read a report you find
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First
Check the period covered
Reports describe a defined window, sometimes years before publication. Practices may have changed since.
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Second
Find the sample sizes
Violations as a proportion of files reviewed is the informative figure, not the raw count.
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Third
Look at the categories
Timeliness failures are a different problem from denial reasoning failures, which are different again from calculation errors.
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Fourth
Read the company response
Frequently included. Disagreement about the facts is itself informative.
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Fifth
Check what was required afterwards
A corrective action plan tells you what the regulator thought needed to change.
The limits of what a report tells you
- It is historical. Corrective action may have followed and practices may be different now
- Absence proves nothing. An insurer with no published report may simply not have been examined
- It covers one state. An insurer's conduct in your state may not match what was examined elsewhere
- It is not about your claim. Findings about a company's general practices do not establish anything about your file
- Informal corrections are invisible. Much is resolved before an examination is ever ordered
What we are not saying
We are not characterising any insurer's current practices, and where a matter consists of allegations we describe it that way. What we are saying is that these examinations read actual claim files against defined standards, that the resulting reports are public in many states, that sampling is what makes their findings meaningful, and that restitution is the outcome that reaches people who never knew they had been affected.
Where to find examination reports
How to look
- Start at your state Department of Insurance site, which almost always ends in .gov
- Look for a section named examinations, examination reports, or company information
- Search by the insurer's exact legal entity name from your declarations page — large groups operate many licensed companies
- Check the enforcement or news section separately, since actions are frequently published there rather than with reports
- Check other states too, particularly where the insurer is domiciled
- The NAIC maintains a directory of every state regulator
The entity name point is the one that defeats most searches. A policy sold under a familiar brand may be issued by a subsidiary with a quite different name, and the examination record is kept under the entity rather than the brand.
Why examinations are coordinated between states
An insurer writing in many states could otherwise face fifty separate examinations of the same practice, which serves nobody.
The NAIC coordinates multistate examinations, with a lead state conducting the work on behalf of participating states and any settlement entered into jointly. The Death Master File matter documented elsewhere on this site began as a single state's examination and became exactly this — a coordinated review of the forty largest life insurers.
For a consumer, the practical implication is that a finding in another state may still be relevant to you, because the practice examined was frequently national rather than local.
One thing worth doing before you buy
Search your state department's site for the exact legal name on the quote — not the brand — and read whatever comes back. It takes ten minutes and it is the only file-level, independently gathered information about that company's conduct available to you at no cost.
If nothing comes back, that is not a bad sign and it is not a good one. It usually means the company has not been examined in your state, which tells you nothing either way.
Check the enforcement section as well as the examinations section. They are frequently separate parts of the same site, and an insurer with no examination report may still appear in the enforcement record.
And search the department where the insurer is domiciled, which is frequently a different state from yours and where the most detailed record tends to sit.
Both records are public and neither costs anything to search.
Ten minutes, once, before you sign anything.
This is general education, not advice. Insurance law and claim rules vary by state and change over time. Nothing here is legal, financial, or insurance advice for your situation, and reading it does not create any professional relationship. For your specific case, consult a licensed professional in your state or contact your state Department of Insurance.