Exam 4 TF & MCQ Flashcards
Traditional Definition of Risk
Uncertainty concerning the occurrence of a loss.
Duties of a CRO
- Oversee all aspects of ERM across the organization.
- Overcomes the “silo” effect by having broad view.
- Interview the risk owners throughout the organization
- Investment managers would own certain asset risk.
- Actuaries would own pricing/product management risk.
- Facilities managers would own hazard risk.
National Association of Insurance Commissioners (NAIC)
§ Voluntary participation by state insurance departments.
§ Goal is to encourage greater uniformity, cooperation, coordination of laws and regulations.
§ Model laws & regulations.
§ No authority beyond what states give it.
When must insurable interest exist?
– Property insurance: at the time of the loss
– Life insurance: only at inception of the policy
The two basic types of plans are:
1) Defined-benefit plans
2) Defined-contribution plans
Definition of Universal life insurance
A flexible premium policy that provides lifetime protection, similar to whole life
Universal Life Insurance
– After the first premium, the policyholder decides the amount and frequency of payments, as compared to whole life where premiums are fixed. (fixed in practice)
– Cash value does not follow a fixed schedule; it varies with:
– policyholder premium payments
– insurer expense and Cost of Insurance (mortality) charges
– rate insurer uses to credit interest to cash value.
* rate often linked to short term interest rates, subject to a minimum.
– The policies have considerable flexibility but can lapse if premiums and interest insufficient to pay charges.
Reasons for the increase in spending include:
Advances in technology- over ½ of cost increases
Cost insulation because of third-party payers
Employer-sponsored health insurance
Fee-for-service defects
High administrative costs
Lack of transparency in cost and quality information
State mandated benefits
Cost shifting by Medicare and Medicaid
Rising prices in the healthcare sector
Defensive medicine (avoid malpractice)
Problem 2: Many people do not have health insurance coverage
Why?
High cost of coverage.
Loss of job leading to loss of health benefits.
Loss of Medicaid coverage or ineligibility for coverage.
People not aware of subsidies under ACA.
Problem 3: Waste and inefficiency
Sources of wasteful spending include:
Duplication of tests
Medical errors that are largely preventable
Unnecessary tests - fear of lawsuits (“Defensive medicine”)
High admin costs and excessive / redundant paperwork
Readmissions into hospitals because of inadequate or ineffective initial treatment
Hospitalizations for preventable conditions
Fraud and overbilling by healthcare providers
Overuse of expensive medical technology and emergency rooms
Problem 4: Harmful insurer practices
Some insurer practices are harmful to both policyholders and applicants for insurance
Examples include:
Exclusions for preexisting conditions
Could be actuarially justified, but there are abuses.
The Affordable Care Act has these goals:
Improve availability of care.
Provide substantial subsidies to reduce cost.
Contain provisions to lower costs.
Establish healthcare exchanges.
What is Long-term care insurance?
Long-term care insurance pays a daily or monthly benefit for medical or custodial care received in a nursing facility, in a hospital, or at home
What are the two types of Coverages for Long-term care insurance?
Two types of coverage
Reimbursement policies
Indemnity policies (or per diem policies)
Life insurance or annuities may have LTC riders.
What are Reimbursement policies?
Reimbursement policies are the most common
These policies reimburse for actual charges up to a daily limit which can range from $50 – 350 or more
