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.
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.