CAS.GovtIns Flashcards
1
Q
Identify the 3 LEVELS of government involvement in insurance (+ examples)
A
- government as SOLE provider (CPP)
- government as a provider in PARTNERSHIP with private insurance (crop reinsurance)
- government as a provider in COMPETITION with private insurance (WC in some states)
2
Q
Identify the 5 REASONS for government participation in insurance
A
- FILLING NEEDS unmet by private insurance (terrorism)
- may occur when private insurance is not economically viable
- after 9/11 terrorist attack in NYC, private market withdrew coverage - When insurance is COMPULSORY (BC auto)
- if compulsory, but not offered by private market (for whatever reason) –> government must provide - CONVENIENCE (flood)
- government may already have necessary structures in place
- (government already provides disaster relief after floods) - EFFICIENCY (auto)
agent commissions eliminated ? lower expense ratio ? lower premiums for consumer - SOCIAL purposes (medical)
- private market is motivated by profit
- this is sometimes at the expense of social purposes like universal medical coverage
3
Q
Why might government insurance succeed where private insurance fails?
A
Government insurance can SUBSIDIZE losses through taxes (Ex: flood, terrorism, crop)
4
Q
Identify 2 ways used by government insurance to subsidize losses.
A
- general tax revenue
- charge less than the actual cost of insurance & fill gap with special fund
5
Q
Identify the 3 criteria that a government insurance program should satisfy
A
- is it welfare or insurance
- is it efficient
- is it necessary
6
Q
Compare insurance v social welfare
A
INSURANCE:
- pays upon covered loss REGARDLESS of need (funded by insureds)
WELFARE:
- pays BASED on need (funded by general tax revenues)
7
Q
Identify 3 reasons to ELIMINATE public (gov) insurance
A
- private insurance can do it
- private insurance offers more CUSTOMIZABLE policies
- efficiency may be OVERSTATED (true expenses may be understated)
