State RegulationsPA specificDifficulty 1/5
Before an insurance company may transact a business of insurance in Pennsylvania, what credential must it obtain?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under 40 P.S. § 47 and 40 P.S. § 420, no insurer may transact a business of insurance in Pennsylvania until it has received a certificate of authority from the Pennsylvania Insurance Department. The certificate is the company-level counterpart of a producer's license: it is the department's formal permission for the insurer to operate in the commonwealth. Marketing or issuing policies before certification places the insurer outside the law regardless of its standing elsewhere.
Why the other options are wrong
- B) A national regulatory association has no chartering power over insurers; admission to Pennsylvania runs through the Pennsylvania Insurance Department under 40 P.S. § 47.
- C) A county business permit may be a local formality, but it does not authorize the transaction of insurance; only the certificate of authority does.
- D) Insurance regulation in Pennsylvania is state-based; there is no federal certificate that substitutes for the department's certificate of authority under 40 P.S. § 420.
Memory hook
Companies need their own permission slip: no certificate of authority, no business.