Final answer:
Life insurance replacement regulation aims to safeguard the interests of policyholders, ensuring financial security and fair practices within the insurance industry. The correct answer is Option B. Policyholders.
Step-by-step explanation:
Life insurance replacement regulation is designed primarily to protect the interest of policyholders. Governments enact insurance regulations to maintain market stability, to prevent deceitful practices and ensure that the relationships between insurance companies, agents, and policyholders remain fair and transparent. Considering the goals of state regulators, which include keeping the price of insurance low and ensuring widespread coverage, the protection of policyholders is paramount since these regulations directly impact their financial safety and the assurance they seek through insurance policies.