porter 2 Flashcards
Describe surplus lines insurance transaction
- licensed surplus line broker places business w/ non-authorized or non-admitted insurer b/c admitted insurers won’t provide coverage
Surplus lines regulation exemptions & their benefits
- Don’t need to file rates adv: can charge high adequate premiums (disadv for consumer)
- Don’t need to use guaranty funds adv: cost of guaranty funds are not passed onto consumers in premiums (disadv for consumer)
Surplus line regulations (3)
- Producers need surplus lines license
- Producers must place business w/ insurers that meet manager & financial requirements (minimum capital & surplus)
- last resort after coverage is declined in admitted market
Paul v Virginia (facts, main question, rulings) (1869)
- Paul not licensed in VA to sell policy (in VA) of company domiciled in NY
- Can VA stop him?
- Yes, insurance is NOT interstate commerce + give states CAN regulate insurance exclusively
National Insurance Convention (1871)
why form
what did it do (3)
Paul v Virgina gave power to state to regulate –> made it difficult for multi-state insurers to meet regulatory demands of all the states they operate in
19 states made …
common regulation goals
uniform accy statement
1st model law to be adopted by all states
first model law
Sherman Antitrust Act (1890)
what is it?
prohibits what?
Impact on insurance at that time?
federal law
prohibits: collusion to gain monopoly
impact: None as Paul v Virginia gave exclusive regulatory power to states
What did Clayton Antitrust Act (1914) prohibit? (5)
Price discrimination
Exclusive dealings
Tying - requring pruchase of 1 product to purchase the other
Mergers to reduce competition
1 person can’t be director of 2 competing companies
What did Robinsons-Patnam Act do? (1936)
Amended Clayton Antitrust Act
Allow price discrimination if price differentials were justified by loss costs
US v SouthEast Underwriters Association (1944)
facts
main question
rulings
NAIC response
facts: USA indicts SEUA (compact sets rates) for violating Sherman act (rate fixing/collusion to gain monopoly)
question: Does fed have authority to regulate?
ruling: Yes, insurance is interstate commerce + fed can regulate + overturn Paul v Virginia
NAIC: proposed laws to a) allow cooperative rate setting + b) return regulation to states
McCarran–Ferguson act (1945)
state role in insurance regulation
fed role in insurance regulation
returned insurance regulation to states w/ 3 exceptions…
- Sherman Act (collusion to gain monopoly) + boycott + coercion +intimidation
- Fed can still regulate if states are not regulating
- Fed can pass law to supersede state law
NAIC created model law called Act relating to unfair methods of competition and unfair deceptive acts and practices in business of insurance’
what did it prohibit?
Rebating – returning portion of premium to policyholder to subvert approved rates
Discrimination
False advertisements
Defamation
Boycott
Coercion - making threat to get someone to do something
intimidation
How does Graham Leach-Biley regulate banking participation in insurance?
requires (1)
probibits (3)
facilitates (1)
- Requires disclosure of info sharing practices
- Prohibits formation of insurance selling subsidiaries by national banks
- Prohibits paying claims w/ bank funds
- Prohibits preventing banks from selling insurance
- Facilitates a producer selling insurance in more than 1 state
Why did NAIC create producer licensing model act
What is NAIC producer licensing model act
Graham Leach-Biley facilitates a producer selling insurance in more than 1 state
reciprocal producer licensing + uniform licensing standards
Business of insurance characteristics defined in ’Group life v Royal Drug’
- contract bw insurer & insured
- spreads risk
- specific to insurance industry
How do insurers influence regulation vs how consumers influence regulation
- lobbyist
- vs watch dog groups & consumer complaints
