Chapter 5 Flashcards
National Association of Insurance Commissioners (NAIC)
A voluntary association of state insurance regulatory officials that is involved in financial examinations of insurers and develops model insurance laws and regulations
Model Law
A draft bill - the suggested wording of a new law - for consideration by state legislators. Any state may choose to adopt a model bill or to adopt it with modifications.
Model Regulation
A draft regulation that may be implemented by a state insurance department if a model law is passed
Prior Approval Law
A law regulating insurance rates that requires proposed rates be approved by the regulatory authority before they may be used by the insurer
File-and-Use Law
A law regulating insurance rates that allows insurers to file their rates with the regulatory authority and immediately begin to use those rates unless/until the regulatory authority disapproves the rates
Use-and-File Law
A rating law with which rates are filed with the insurance commissioner within a specified time after the rates are first used. The insurance commissioner may, however, disapprove the rates.
Flex-Rating Law
A law regulating insurance rates that requires regulatory approval of new rates only if they differ from the existing rates by at least some specified percentage, such as 5 or 10 percent.
Open Competition
The reliance mainly on competitive forces in the insurance marketplace to produce acceptable insurance rates
Legal Reserve
The minimum amount of the reserve, as specified by state law, that a life insurer must maintain to meet its assumed future claim costs under a block of policies. It is discounted for future premium and investment income under those policies.
Unearned Premium Reserve
In property and liability insurance, an insurer’s liability for future claims or premium refunds, as measured by the proportion of the written premiums for those policies that the insurer has not yet earned by providing protection for the full policy period.
Loss Reserve
In property and liability insurance, an insurer’s liability for losses that have already occurred but have not yet been paid or otherwise settled.
Nonadmitted asset
An asset of an insurer that is not permitted by regulatory authorities to be counted as an asset for Annual Statement purposes
Unfair Trade Practices
Insurance practices prohibited by a state unfair trade practices act, such as rebating, twisting, misappropriation, commingling of funds, and misleading advertising. Violators are subject to penalties that include suspension or revocation of licenses.
Rebating
The usually illegal practice of returning a part of the premium to the policyowner (except as a dividend) as a price-cutting sales inducement
Twisting
The illegal practice in life insurance of using misrepresentation to induce a policyowner, to his or her disadvantage, to replace a life insurance policy with a new one.
