Chapter 8 Vocab (Text) Flashcards
Admitted Assets
assets that the insurer can show on its statuatory balance sheet in determining its financial condition
Alien Insurer
insurance company chartered by a foreign country and meeting certain licensing requirements
Assessment Method
the major method used to raise the necessary funds to pay unpaid claims
Credit-Based Insurance Score
majority of insurer’s use applicants credit record for purposes of underwriting and rating in the auto and homeowners insurance
Domestic Insurer
insurer domiciled in the state; it must be licensed in the state as well as in other states where it does business
File and Use Law
Law for regulating insurance rates under which companies are required only to file the rates with the state insurance department before putting them into effect
Flex-Rating Law
Type of rating law in which prior approval of the rates is required only if the rates exceed a certain percentage above and below the rates previously filed
Financial Modernization Act of 1999
A federal law that allows banks, insurers, investment firms, and other financial institutions to enter and compete in each other’s financial markets
Foreign Insurer
Insurance company chartered by one state but licensed to do business in another
McCarran-Ferguson Act
1945, states that continued regulation and taxation of the insurance industry by the states are in the public interest
Modified Prior-Approval Law
a state rating law where rate changes are based solely on loss experience; the rates must be filed with the state insurance department and can be used immediately. however, if the rate change is based in rate classification or expense relationship, prior approval of the rates is necessary.
National Association of Insurance Commissioners
meets periodically to discuss industry problems that might require legislation or regulation
No Filing Required
Rating law where insurers are not required to file their rates with the state insurance department to file their rates with the state insurance department but may be required to furnish rate schedules and supporting data to state officials
Paul v Virginia
1868 Landmark legal decision that affirmed the right of the states to regulate insurance
Policyholders’ surplus
difference between an insurance company’s assets and its liabilities
Prior-Approval Law
law for regulating insurance rates under which the rates must be filed and approved by the state insurance department before they can be used
Rebating
a practice, illegal in almost all states, of giving a premium reduction or some other financial advantage to an individual as an inducement to purchase the policy
Reserves
liability items on an insurer’s balance sheet and reflect obligations that must be met in the future
Risk Based Capital (RBC)
Under NAIC standards, insurers are required to have a certain amount of capital that is based on the riskiness of their investments and operations
South Eastern Underwriters Association
cooperative rating bureau that was found guilty of price fixing and other violations of the Sherman Antitrust Act
Systemic Risk
Risk of collapse of an entire financial system or financial market in which the failure of a single entity or group of entities can result in the breakdown of the entire financial system
Twisting
Illegal practice of inducing a policyholder to drop an existing policy in one company and then replace it with a new policy in another company through misrepresentation or incomplete information
Use and File Law
A rating law that is a variation of a file and use; insurers can put into effect immediately any rate changes, but the rates must be filed with regulatory authorities within a certain period after first being used
