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ALU-101 > Insurance Regulation, Basic Compliance, MIB > Flashcards

Insurance Regulation, Basic Compliance, MIB Flashcards

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1
Q

what 2 practices does the market conduct regulations address?

A
  1. discriminatory

2. privacy

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2
Q

what are the four pillers of the financial sector in canada ?

A

insurance industry
banks
trust companies
investment dealers

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3
Q

who regulates the financial industry?

A

state/provincial and federal government in both Can and US.

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4
Q

what are the two associations (us/ can) that uniformy maintain laws and regulations to all insurances companies?

A
  1. US= NAIC

2. CA= CLHIA

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5
Q

whos is directly responsible fo the regulation and auditing of the insurance companies?

A

a commisioner, often known as the office of the superintendent of insurance

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6
Q

who makes recommendations on regulatory issues to promote consistancy throughout the insurance industry?

A

the superintendents along with the federal government comprise the CCIR- they work on the regulations.

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7
Q

each province has adopted a common law with minor variations, except for?

A

quebec

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8
Q

what has shapped the life insurance industry in the united states?

A

court rulings

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9
Q

what happened from the paul vs. virgina case

A

gave authority to regulate the life insurance industry

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10
Q

what happened in the US vs. South-Eastern U/W association?

A

courts stated that insurance was in fact, subject to federal regulation.

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11
Q

what happened in the McCarran-Ferguson Act of 1945?

A

due to conflicting ruling, the government stated that if a states regulation is adequate than the state would be able to regulate the life insurance industry. if the state regulation is felt to be inadequate or not in the publics interest, then congress can enact regulatory legislation.

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12
Q

who regulated how the life insurance industry handles public retirement plans and how the individual companies procide benefits to their employess?

A

ERISA (employee retirement income security act)

this act also encompasses the HIPAA

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13
Q

what did the Fair credit reporting act of 1970 accomplish?

A

impacted how the insurance industry obtrains the informaiton necessary to u/w life insurance applications

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14
Q

who governs the sale and advertising of variable securities?

A

SEC and FINRA- (formaly NASD.

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15
Q

what does the FINRA rule 2210 require?

A

companies to file all variable life advertisements and sales literature prior to first use of publication.

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16
Q

does the life insurance regulation vary from state to state?

A

yes, each has its own commissioner.

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17
Q

how does the NAIC work to promote uniformity in state regulation?

A

through the development of model laws. - they are not actual laws but provide the states with a working document on which they can pattern their individual states’ regulations

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18
Q

can a state just sell an insurance product?

A

no they need approval from the state insurancce department

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19
Q

what is the purpose of the intertate insurance product compact model law, created byu the NAIC?

A

in effort to standardize the approval of life insurance, annunity, disability income and long term care products. IT provides uniform standards amount the states.

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20
Q

what will be the purpose of the SERFF (systems for electronic rate and form filling) created by the NAIC?

A

to improve the efficiency of filling in multiple states.

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21
Q

each state is required to be audited and belong to its Guaranty Association. What is Guaranty Association?

A

helps cover losses to some extent is a company has financial difficulites

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22
Q

what is the purpose fo the NAIC’s financial regulation standards and accreditation program?

A

desgined to review the solvency regulation of the states. it monitors the states solvency laws and examination process

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23
Q

what are the responsibilities of each of the 4 zones of the NAIC.

A

for auditing companies domiciled in its area.

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24
Q

unlike the US, what level of government regulates the insurance companies?

A

federal and provincial. the act is the primary legislation, which governs insurance companies, and fraternal benefits societies in canada.

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25
Q

what percentage of companies are regulated by the canadian federal governement?

A

90%.

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26
Q

who regulates the province of quebec?

A

regulated by the quebex civil code that came into effect in 1999.

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27
Q

who is responsibl for the supervison of the company’s financial condition and general compliance?

A

OSFI- measures condition of life insurance companies by comparing the total capital of the company to the MCCSR.

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28
Q

what does the MCCSR do?

A

determines the amount of capital a company must have on its balance sheet.

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29
Q

what is the purpopse of the capital requirement?

A

to ensure the company is financially stable in the event of unexpected experience.

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30
Q

What is assuris? (formaly known as the canadian life and health insurance compensation corporation of comp corp)

A

similar to guaranty association of the US.
operated by CLHIA
provides uniform and guidelines in the development of regulations.

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31
Q

who regulates the financial condition of most insurance companies in canada?

A
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32
Q

what does provincial government regualted?

A
  • agent’s conduct and licensing along with contractual matters
  • reviews of complaints.
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33
Q

What is the Model law on Illustations developed by the NAIC?

A
  • provides for disclosure during sales
  • provide standards to be followed to protect applicants
  • promotes education trhough the use of disclosure
  • allows for side-by-side comparison
  • does not prohibits the sale of vanishing premium policits.
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34
Q

What does the Model law on illustations require?

A
  1. name of insurer
  2. name of business address of the producer
  3. name, age, sex of proposed insure
  4. underwriting or rating classifiication
  5. generic name of the policy, company product name, and form number
  6. initial death benefit
  7. dividend option election or application of non0guareenteed elements.
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35
Q

What does the CLHIA G6 incoorportate? (2 laws)

A

2/8 components of the consumer code of ethics:

  1. to advertise products and services clearly and straighforward
  2. avoid practices that might mislead of deceive, to ensure that illustations of prices values and benefits are clear and fair, and contain appropriate disclosiure of amount that are not guarenteed.
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36
Q

what is the purpose of the CLHIA G6 law?

A

sets standards for use in rpeparing life insurance illustrations and informing the insured or proposed insured about the features of teh policy.

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37
Q

what should be included on the CLHIA G6 illustration?

A
  1. date the illustration was prepared
  2. name of the person for which it was prepared
  3. name of the insurer
  4. for proposed insurance illustrations- the producers name
  5. age, gender, rate basis,
  6. each page must show its number along with the total number of pages
  7. clearly state guaranteed vs. non-guarenteed values or features
  8. if amounts illustrated are not guarenteed, the illustation should identify those factors that could influence the results and provide at least two scenarios of illustrated results
  9. the earliest period that cash surrender values and/or policy dividends would be available
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38
Q

what is the action of churning?

A

the replacement of the same company’s policy

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39
Q

what is the action of twisting?

A

the replacement of policies of another company to, increase a producers commisions with limited, if any, benefit to the insurer.

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40
Q

In many states, certain insurance policies are exempt from the replacement regulations. Nam them

A
  1. credit life insurance
  2. group life or annuities
  3. replacement under a binging or condition receipt
  4. contractual change
  5. conversion priviledge,
  6. policies or contracts used with pension
  7. profit sharing
  8. plans that qualify for tax deductibility of premium/ non-convertable term coverage (exp 5 yrs)/ policy paid by an employer or association/structured settlements.
41
Q

what is required by the agent when a proposed insurer is to sign a policy, [ in regards to model replacement regulations]

A
  1. applicant signs a statement to weather a replacement of a life policy or annuity is involved.
  2. sign as to their knoweledge of replacement
    - if involved, an agent must have applicant read and sign a nottice of replacement
42
Q

In addition to the states requirements the FINRA also provides what?

A
  1. additional requirements to review the suitability of a replacement.
  2. insurance company must notify applicant of possible replacement
43
Q

which act regulates the replacement laws in canada?

A

covered under the provincial insurance acts

44
Q

what are the exemptions to the replacement act in canada?

A

exemptions include execution of a contractual conversion privilege and a contract that is replaced by an annuity or by group insurance.

45
Q

What must agents do, in according to replacement policies in canada?

A
  • obtain a signed statement with every application attesting to wheather or not a replacement is intended.
  • if intended the following:
    1. agent should present and review a complete disclsoeure statement with signatures
    2. within 3 days, forward to every insurer (whos contract is being replaced) a completed copy of the disclosure statement with signatures and to every insurere that has been requested to issue a new contract a fully completed copy of the disclsoure along with all written proposals presented to the aplicant
    3. deliver the new life insurance contracts as soon as poisble.
46
Q

what is required by the insurance company to the adivsor, in terms of replacement products in canada?

A
  • verifying agent has complied with all the requirements, and has copied
  • procide agen with all the info necessary to complete the disclosure dorm,
47
Q

when can an applicant with draw his application from an insurance company in canada (in terms of replacement?)

A

20 days, and have full refund and premium deposit. (unless for single premium contract)

48
Q

is a completion of a disclosure form during replacement required for the quebec province? why?

A

no- but the agent must notify the applicant in writing of the advantages and disadvantages of the repolacement
- must also present in writing the intent to replace an existing contact, why and what- to the client.

49
Q

what is a special rule in saskatchewan, in terms of policy replacement, why?

A

as results of privacy regulation, an applicant can decided not to share the informaiton required by signing a waiver form

50
Q

the HIPAA required insures to redesign current authorizations for request an APS to include the 7 following:

A
  1. description of the information to be use/disclosed
  2. name of the covered entity or class authorized to use or disclosed the PHI
  3. the name of recipient of the use
  4. an expiration date and time period of event
  5. a description of each purpsoe of the requested use or disclose
  6. a signature and date
  7. requirement statments:
    a) the right to revoke the authorization in writing
    b) the ability or inability to condition tx, payment, enrollment or eligibility for benefits on the authorization
    c) wwhen informaiton disclosed to the autho is s/t redisclosure and no longer protected by federal priv. laws
51
Q

the HIPAA regulates information collected that could be individually identifiable health informaiton such as

A
  1. cx physical and metal health
  2. info that is a provision of healthcare to an indi.
  3. pertains to the payment of health care to an indi
  4. provides identifiable informaiton
  5. created or received by a covered entity
  6. identifies an individual
  7. when its resonable to belive an indi can be identified by the given info.
52
Q

how did the HITECH act of 2009 strengthen the HIPAA act?

A

though expanded notification requirements and penalties for failing to comply. - in the event of a breach of informaiton to records providers and no HIPAA business associates.

53
Q

what was the purpose of the FCTA act of 1970?

A

to protect consumers and to ensure accuracy of consumer reports.

54
Q

what can be included in the information from a CRA?

A 
credit hx
medical conditions
driving records
criminal records
hazardous sports
55
Q

What is the definition of medical information according to the FCRA?

A

informaiton or data wheter oral or recorded , in any form, created by or derived from a health care provide or the consuer, that relates to the past, present or future physical, mental or behavioral health or condition of an individual.

56
Q

what must an insurance company obtain prior to requestion informaiton from a consumer reporting agency?

A

authorizations. (most applications will have this disclosed on the app above the signature)

57
Q

what is an adverse action as defined by the federal trade commision?

A

a denial, or cancellation of, an increase in any change for, or a reduction or other adverse or unfacourable change in terms of coverage or amount of, any insurance, existing or applied for, in connection with the u/wing of insurance.

58
Q

should a notice be given to a cx if any information from the CRA was used in a whole/ or as part of the decision to rate or decline the application? how must it be done?

A

yes, and it is not required in writing! (but most companies with provide a letter)

59
Q

What was the purpose of the FACTA of 2003, in regards to FCRA?

A

provided additional provisions, regarding identity theft, cosumer access to credit info, limits on the use and sharing of medical info. and financial litteracy and educaiton improvement.

60
Q

What is the purpose of the GLB act enacted by congree in 1999?

A

requires financial institutions which includes insurance companies, to establish privary policies to protect the security and confidentiality of the non-public personal information of its customers

61
Q

What is non-public personal information as defined by the GLB?

A

personal identifiable financial information that

  1. was povided by a consumer to financial institution
  2. resulted from any transaction with the consumer or any service performed for the consumer
  3. was o/w obtanined by the financial institution
62
Q

what are examples of non-public personal information?

A 
social security numbers
addresses 
health information
driving records
financial asseset
63
Q

what goes the GLB require from companies to provide to their customers?

A

inform at the beginning of its privacy policy and at minium annually there after.
- prohibits them from disclosing non-public info to a nonaffiliated 3rd party, without first disclosing to customer.

64
Q

what model law was drafter by the NAIC in response to the GLB?

A

privary of consumer financial and health informaiton regulation, to help clarify many of the rules as it relates to insurance companies.

65
Q

for most of the CAN provinces the privacy laws fall under what two acts?

A

PIPEDA (2004- effect)

privacy act

66
Q

which provinces has enacted their own privacy legislations by is similar to the PIPEDA legislations?

A

BC
alberta
quebec

67
Q

what does PIPEDA require from organizations?

A

obtain individuals consent prior to the colleciton, use, or disclsoure of an individuals personal info.

68
Q

what kind of personal information is defined by the PIPEDA act?

A
  1. age, name, wight, height, address.
  2. medical records
  3. ID numbers, income, ethnic origin, Blood type
  4. marital status, religion, education
69
Q

the PIPEDA act was basewd on the canadian standards association and which of its 10 principales?

A
  1. accountability
  2. identifying purposes
  3. consent
  4. limitting collection
  5. limitting use, disclosure and retention
  6. accuracy
  7. safeguards
  8. openness
  9. individual access
  10. recourse.
70
Q

What does the Quebec Bill 68 require from an insurance company in terms of collecting information on an applicant?

A
  • there must be legitimate need
  • notice must be given to the person stating the object and intent of use
  • indentification of the object of the file
  • use of the info in the file
  • indification of the person who will have accress
  • location of the file
  • procedures for the person to access and correct information in that file.
71
Q

will the Quebec bill 68, can a person request information be deleted from their file?

A

yes, if the informaiton is incorrect or not authorized.

72
Q

what is the USA PATRIOT ACT? what is included in this act?

A

intended to help combat terrorism (following 09-2011) though increased scrutinuy of financial transactions.
-MLAA- extend the previous bank secrecy Act to cover insurance companies

73
Q

what does the USA PATRIOT act require from financial institutions

A

set up anti-money laundering programs

-require trianning and auditing the program.

74
Q

what is SARs? and what is its purpsoe

A

comapnies are requires to file Suspicious Activity Reports with the FinCEN for all suspecious transactions of 5K of more.

75
Q

what are 4 examples of suspicious activities that an u/wer might see?

A
  1. non schedules payment over 5K made by cash, cashiers check or money order
  2. large payments that would exceed the 7702 or MEC guidelines, requiring a refund on the premium,
  3. Li app with foreign ownership or proposed insured without appropriate doc. allowing them to reside in the US
  4. a request for a free look or cancellation while the owner residing overseas.
76
Q

in addition to the FinCEN who else is part of the unites states treasury that enforces economic sanctions and embargo programs? what do they do?

A

OFAC

- do not allow transactions with SDN

77
Q

what steps has the MIB inc, taken to help insurance companies check for proposed insurers that have been designated as SDNs?

A

coding,
insurance companies are blocked from issuing policies on those designated as SNDs and OFAC supersedes all insurance regualtions under the president;s exercise of forein affairs and national emergency powers

78
Q

What does the CIP do?

A

pertains to the sale of variable products in the US.

  • requires that identity to the customer be verified and documented when a new account is opened.
  • requires that the sale of variable products must be suitable for the proposed insuere.
79
Q

who is responsable for reviewing the suitability of a product sale to a customer?

A

the adcisor and broker dealer

80
Q

the ACLI created the IMSA to promote what?

A

ethical market conduct of the life insurance companies.

  • IMSA can assist companies in developing compliance programs.
  • companies use IMSA membership in their advertising
81
Q

what is the purpose of the sarbanes-oxley act of 2002?

A

designated to protect shareholders from inaccurate financial reporting by corporaitons.

  • act is limited to companies that are publicly traded
  • comprised of 11 titles (used to develop and enhance financial reporting of corporations)
82
Q

What was the purpose of the proposed model regulations requiring annual audited financial reports in response to the sarbanes-oxley act?

A

requires annual examination of a companies financial statement by certified public accountants.
- covers ALL insurance companies.

83
Q

what act was developed to provide uniform product filling standards?

A

the interstate insurance product regulation compact

84
Q

what is MIB?

A

its a membership coorporation, “industry trade association”

  • operates as “nationwide speialty consumer reporting agency”
  • goerned by FCRA
  • provides consumer reports
  • used to detect and deter fraud in the application process
85
Q

Under the MIB’s bylaws, what is required to be an eligible member (5 things)?

A
  1. business entity must be organized as an insurance company conducting life or health business
  2. duly licensed
  3. good standing with appropriate regulating authorities
  4. have a medical director with good repute at its domicile
  5. follow a stupulated code of conduct in regards to MIB information.
86
Q

to ensure consumer protection MIB requires its members to do what?

A
  1. provide a self-audit report (annual)
  2. allow an on-site audit of several pre-selected file every 3 years.
    - duign that visit the MIB furnishes education and guidance regarding rules and procedure
87
Q

What is required of the member company, in terms of MIB reports?

A
  • furnish each individual applicant with a pre-notive describing MIB and the right to request and arrange disclosure in keeping with acceptable FCRA procedures.
88
Q

Can a consumer obtain a copy of his MIB record?

A

yes, susually to seek a correction of the MIB reccord.

89
Q

How long does MIB retain coded reports, before theyre automatically deleted?

A

7 yrs

90
Q

who has access to MIB record information?

A

medical
u/w
claims personal

91
Q

Can an u/w make a decision on the sole basis of a reported code?

A

no!
prohibited under the MIB general rules.
U/W must do the necessary research to find out the specifics of the condition that was reported.

92
Q

member companies have what responsibility in regards to reporting codes?

A

report a breif, coded report of conditions and findings significant to a propsoed insurred’s mortality or morbidity

93
Q

Name some of the most commonly reported conditions, coded by the MIB

A

build, HTN, DM, ECG/EKG

94
Q

what are examples of non-medical codes that can alert an u/w, regarding MIB codes?

A 
over-insurance
criminal activity
driving record, 
hazartdous sports
aviation
95
Q

What is a Post-notice MIB? must the proposed insurer be informed?

A

yes,
and its whenever the member recieved any information from MIB pertianin to eh applicant, which resulted in further investigations.

96
Q

What does the post-notice MIB allow for a consumer?

A

provide an addition free disclosure of their MIB record [in accordance to NAIC information and privacy protection model act, (FCRA) and other laws,]

97
Q

what other 3 additional services are offered to nay MIB service member, in addition to basic inquiry or checking services?

A
  1. plan F (follow-up service)
  2. Insurance Activity Index (IAI)
  3. Disability insurance record service (DIRS)
98
Q

In the US there are discussions regarding a Federal Charter to help create more uniformity within the insurance industry. How did the NAIC respond?

A

with the Alliance for Sound State Uniform Regulatory Efficiency (ASSURE)- to maintain current state regulation and promote uniformity.

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