Module 1, Lesson 2

Question 1

Two Goals of Insurance Regulation

Answer 1

1. To ensure that every insurance company remains financially sound—is able to meet its debts and pay contractual obligations when they come due.
2. To ensure that every insurance company conducts its business fairly with honesty, integrity, and competence.

Question 2

Solvent

Answer 2

A company with the financial capacity to pay its debts and contractual obligations when due.

Question 3

Market Conduct Laws

Answer 3

A law that regulates how insurance companies conduct business.

Question 4

McCarran-Ferguson Act (Public Law 15)

Answer 4

A U.S. federal law under which the U.S. Congress left insurance regulation to the state governments, as long as Congress determines that regulation to be adequate.

Question 5

Dodd-Frank Wall Street Reform and Consumer Protection Act

Answer 5

U.S. legislation passed in 2010 in the wake of the 2008 financial crisis to reshape the regulation of financial institutions. Dodd-Frank is administered in part by the Securities and Exchange Commission (SEC) and in part by the Treasury Department. Also known as Dodd-Frank.

Question 6

Federal Insurance Office (FIO)

Answer 6

A new federal agency created by the Dodd-Frank Act with federal authority to monitor the insurance industry.

Question 7

State Insurance Department

Answer 7

An administrative agency in each state that is responsible for making sure that companies operating in the state comply with applicable regulatory requirements.

Question 8

Insurance Commissioner

Answer 8

The individual who is responsible for directing the operations of the state insurance department. Also known as the superintendent of insurance or director of insurance.

Question 9

National Association of Insurance Commissioners

Answer 9

In the United States, a nongovernmental association of the insurance commissioners of all the states whose primary function is to promote uniformity of state insurance regulation by developing model laws and regulations as guidelines for the states.

Question 10

Model Bills

Answer 10

A sample law offered by the NAIC that the states are encouraged to use as a basis for their laws.

Question 11

Certificate of Authority

Answer 11

A document that grants an insurer the right to conduct an insurance business and sell insurance products in the jurisdiction that grants the certificate. Also known as a license.

Question 12

Policy Forms

Answer 12

A standardized form that shows the terms, conditions, benefits, and ownership rights of a particular type of insurance product.

Question 13

Consumer Protection Laws

Answer 13

Consumer protection laws prohibit insurers from engaging in unfair competition or unfair or deceptive business practices, primarily related to interstate advertising.

Question 14

Privacy Laws

Answer 14

Privacy laws affect how insurers collect and use personal information about their customers.

Question 15

Income Tax Laws

Answer 15

Income tax laws encourage people to invest and employers to provide retirement savings plans and greatly impact the design of insurance products.

Question 16

Antiterrorism Laws

Answer 16

Antiterrorism laws require insurers to take steps to detect and prevent illegal activities used to finance terrorism

Question 17

Corporate Governance Laws

Answer 17

Corporate governance laws impose certain requirements on corporations regarding organization, accountability, and disclosure. One such law, the Sarbanes-Oxley Act of 2002, protects investors and other stakeholders by improving the accuracy and reliability of corporate disclosures made in accordance with securities laws.

Question 18

Life and Health Insurance Guaranty Association

Answer 18

In each state in the United States, an organization that protects policyowners, insureds, beneficiaries, annuitants, payees, and assignees against losses that might result from the impairment or insolvency of a life or health insurer that does business in the state. Insurers are required to participate in a state’s guaranty association in order to be licensed in that state.