Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

Federal authorities influence the insurance industry significantly through the Internal Revenue Codes. This influence primarily manifests in the way federal tax laws govern the taxation of insurance products and companies. For example, certain types of life insurance policies can receive favorable tax treatment under these codes, such as tax-deferred growth of cash values and tax advantages for death benefits. This encourages consumers to purchase these products and shapes how insurance companies formulate their offerings to take advantage of these tax provisions.

The other options highlight important elements of the regulatory environment but do not directly represent the primary method through which federal authorities exert influence over insurance. State regulations, for instance, are indeed a major part of insurance oversight, but they are not a direct federal influence. Similarly, while the Securities Exchange Commission oversees securities and financial instruments, their regulatory reach does not encompass all aspects of the insurance industry, particularly in non-securities insurance products. The Employees Retirement Income Security Act is significant for retirement plans but is not as comprehensive in terms of general insurance industry oversight compared to the Internal Revenue Codes.