Ch. 14 - Insurance regulation, basic compliance, and MIB Flashcards
What is the primary purpose of insurance regulation?
To protect policyholders and ensure the financial stability and ethical conduct of insurers.
Who regulates insurance in the United States?
Each individual state’s insurance department or commissioner.
What is the NAIC and what does it do?
The National Association of Insurance Commissioners develops model laws and regulations to promote regulatory consistency among states.
What are three major areas of insurance regulation?
Solvency, market conduct, and consumer protection.
What is solvency regulation?
Ensures insurers maintain enough financial resources to meet future claims obligations.
What is market conduct regulation?
Governs how insurers sell products and interact with consumers—includes underwriting, sales, and claims practices.
What is the role of an insurance compliance department?
To ensure the company adheres to all applicable laws, regulations, and internal policies.
What are common compliance risks in underwriting?
Discrimination, privacy violations, unfair practices, or failure to follow internal guidelines.
What law governs the collection and sharing of consumer information?
The Fair Credit Reporting Act (FCRA).
What must be disclosed when consumer reports are used in underwriting?
Applicants must be notified that consumer information may be obtained and have a right to see the report.
What is the MIB (Medical Information Bureau)?
A membership organization that helps insurers detect fraud and misrepresentation by sharing coded underwriting information.
What type of information does the MIB provide?
Coded alerts related to medical history, avocations, insurance applications, and other underwriting-relevant data.
Can the MIB report be used to decline an application on its own?
No — it must be verified through other sources; it’s only a guide for further investigation.
What must insurers do before accessing MIB information?
Obtain written authorization from the applicant.
How long is information retained in the MIB?
Up to 7 years from the date it is reported.
Can consumers access their MIB record?
Yes — individuals have the right to request and review their MIB file once per year.
What is adverse action under the FCRA?
When coverage is denied or rates increased due to information from a consumer report, requiring notice to the applicant.
What other organizations support industry compliance and fraud prevention?
Organizations like LOMA, LIMRA, and ACLI offer guidance, training, and industry standards.
What is anti-selection in underwriting?
When applicants use knowledge of their health or risks to their advantage, potentially misleading the insurer.
Why is privacy regulation important in life insurance?
To protect the confidentiality of sensitive health and personal data collected during underwriting.
What are insurer responsibilities under state insurance laws?
Licensing, financial reporting, claim handling, fair marketing, and consumer disclosures.
What are “model regulations” from the NAIC?
Suggested legal frameworks that states can adopt to regulate insurance consistently.
The National Association of Insurance Commissioners (NAIC) works to promote uniformity in state regulation through the development of:
1. audit guidelines
2. model laws
3. white papers
4. surplus requirements
- model laws
In the U.S., a Health insurance Portability and Accountability Act (HIPAA) authorization must include all the following EXCEPT:
1. an expiration date
2. the purpose of disclosure
3. the plan of insurance
4. the signature of the proposed insured
- the plan of insurance
