Authority for the Department of Insurance is found in both the Arizona Constitution and the Arizona Revised Statutes. The Arizona Constitution, Article 15, Section 5 provides that domestic and foreign insurers are subject to licensing, control and supervision by a department of insurance, as prescribed by law.
Arizona Revised Statutes, Title 20, outlines insurance law and establishes the Department of Insurance (Department). The Director of the Department, appointed by the Governor, has general authority to enforce insurance laws, to adopt rules, and to investigate and resolve consumer complaints (A.R.S.§§20-101 et seq.).
The Department’s mission is to “promote a strong insurance marketplace through consumer protection, sound financial regulation, and economic development”.
The objectives of the Department are to “administer the state’s insurance laws, protect the citizens of this state who purchase insurance, provide a better response to the needs of persons who purchase insurance, stimulate the insurance market by encouraging competition, protect the public from unregulated insurers and represent insurance consumers’ interest” (Laws 2010, Chapter 13, Purpose).
The Department consists of several divisions:
Office of the Director; Financial Affairs Division; Office of the Insurance Guaranty Funds; Captive Insurance Division; Consumer Protection Division; Insurance Fraud Division; Market Oversight Division (which includes life, health, property and casualty insurance); and Administrative Services Division. Department of Insurance Annual Report 2016-2017.
The Department’s Insurance Guaranty Funds provide a safety net to protect consumers from financial loss if an insurance company becomes insolvent. Subject to some conditions and limitations, the Life and Disability Insurance Guaranty Fund and the Property and Casualty Insurance Guaranty Fund pay certain claims of policyholders and other claimants owed by an insolvent insurance company.
In 1912, Arizona’s First Legislature established the Corporation Commission and granted it authority over public service corporations and other corporations. (Laws 1912, Chapter 90.) During the same session, the Legislature granted the Corporation Commission authority to regulate businesses and corporations, specifically insurance companies. (Laws 1912, Chapter 48). The Legislature continued to grant the Corporation Commission authority over regulation of insurance, making its authority stronger and more comprehensive.
In 1954 the Legislature enacted a state insurance code, which revised and codified all the state insurance laws in place at that time. The law also repealed prior versions of state insurance laws which had been adopted since 1913. The “Arizona Insurance Code” regulated insurance companies, the insurance business, the sale and solicitation of insurance, and prescribed penalties. The Insurance Code also levied taxes and provided for their disposition. (Laws 1954, Chapter 64, effective January 1, 1955). In addition, the law provided for a Director of Insurance, who was appointed by the Arizona Corporation Commission.
In 1962, the responsibilities of the Director of Insurance were expanded. Laws 1962, Chapter 133 created the office of Commissioner of Public Building Safety, designating the Director of Insurance as the administrator with authority to enforce fire prevention and fire safety laws of the state and ordinances of cities and counties. This responsibility remained with the Director of Insurance until 1972 when the office of Commissioner of Public Building Safety was abolished and the Office of Fire Marshal was established within the Industrial Commission. See Laws 1972, Chapter 61. Note: A history of the Department of Fire, Building and Life Safety is included as a separate entry.
The Department of Insurance was created as a separate agency in 1968 (Laws 1968, Chapter 197). In order to create the Department, a constitutional amendment was necessary because the Department would assume authority for licensing, control and supervision of domestic and foreign insurers, a power that had been solely the jurisdiction of the Corporation Commission. Proposition 106, amending Article 15 of the state Constitution, was approved by voters in the general election of November 1968. It transferred the authority to regulate insurance companies from the Corporation Commission (by modifying the first paragraph of Section 5) to the Department of Insurance (by adding the second paragraph to Section 5). The second paragraph also authorized establishment of the Department of Insurance and required the Governor to appoint the department director.
The Department of Insurance has remained a separate agency since 1968, and has been subject to sunset review several times. The Department was most recently continued for ten years, pursuant to Laws 2010, Chapter 13.
Laws 2017, Chapter 190 created a dispute resolution process to address surprise out-of-network bills and required the Department to develop an arbitration procedure to resolve disputes. Surprise out-of-network bill is a bill for a health care service that was provided in a network facility by a health care provider that is not a contracted provider and that meets one of the requirements listed in statute. Various changes were made the following year to the statutory provisions adopted in 2017. See Laws 2018, Chapter 272. The measures became effective on January 1, 2019.
Laws 2018, Chapter 32 modified the qualifications to serve as director of the Department by removing the state residency requirement.
Laws 2018, Chapter 64 expanded the Arizona Life and Disability Insurance Guaranty Fund membership and coverage to include health care services organizations (also known as health maintenance organizations or HMOs). The measure also increased the number of members on the Life and Disability Guaranty Fund Board from nine to eleven.
Arizona State Constitution, Article 15, Section 5
A.R.S.§§20-101 et seq.
Laws 1912, Chapter 48 and Chapter 90
Laws 1954, Chapter 64
Laws 1962, Chapter 133
Laws 1968, Chapter 197
Laws 1972, Chapter 61
Laws 2010, Chapter 13
Laws 2017, Chapter 190
Laws 2018, Chapter 32, Chapter 64, and Chapter 272
Arizona Department of Insurance website
Master List of State Programs
Arizona Department of Insurance, Sunset Review Report (2009). Arizona State Research Library, State Documents Collection- ID 1.2:S 85/ 2009 and LG 9.2:1 57/2009
A Consumer’s Guide to the Arizona Department of Insurance
Insurance Department of Arizona, Annual Report, “Fifty Years of Successful Regulation of Insurance in Arizona” (1962). Arizona State Research Library, State Documents Collection- ID 1.1:962
Arizona Department of Insurance- Annual Report 2016-2017
Proposition 106, November 3, 1968:
Related collections at Arizona State Archives
- Record Group 172 Insurance, Arizona Department of
Publication locations within State Documents Collection at State Library:
- CC 7 Insurance Division
- ID 1 Dept. of Insurance
- ID 2 Fraud Unit
- ID 3 Consumer Affairs Division
- ID 6 Joint Underwriting Plan
- ID 8 Commission on Property and Casualty Insurance