What is the main purpose of requiring a license for persons who transact insurance?

The main purpose of requiring a license for individuals who transact insurance is to ensure that those selling insurance products have the necessary knowledge and skills to provide accurate information and appropriate coverage to consumers. Licensing establishes a baseline of competence, ensuring that insurance producers understand the complexity of insurance products, the legal obligations involved, and how to fulfill the needs of clients effectively.

By requiring licensing, regulatory bodies aim to protect consumers from fraud and misinformation. Properly licensed individuals are held to professional standards, which helps build trust in the insurance industry. This regulation not only benefits consumers by guaranteeing they are dealing with knowledgeable professionals but also supports the integrity of the insurance market as a whole.

While generating government revenue and promoting employee benefits are aspects related to the insurance industry, they do not directly address the fundamental need for consumer protection and professional competency, which is the core reason behind licensing requirements. Similarly, restricting competition is not a primary goal of licensing; rather, the focus is on ensuring that all participants in the market are adequately trained and qualified.