What is the primary function of an insurance code?

The primary function of an insurance code is to define regulatory standards for insurers. Insurance codes are established by state legislatures and serve as comprehensive guidelines that govern the conduct of insurance companies. They create a framework for how insurers operate, ensuring compliance with the law and protecting the integrity of the insurance market.

These codes outline the requirements for obtaining and maintaining a license to operate, the financial obligations insurers must meet, and the standards for policy forms and practices, which help in maintaining fairness and transparency in the insurance industry. By establishing these regulatory standards, the insurance code also enhances the stability and reliability of the insurance system, which ultimately serves the interests of consumers as well.

While the other options might seem relevant, they serve more as components or outcomes of the broader regulatory framework established by insurance codes. For instance, setting premium rates is part of the operational guidelines specified within the code, protecting consumer interests is a goal achieved through regulatory adherence, and categorizing policies can occur under the definitions set forth but is not the primary purpose of the code itself.