porter 3,4,5 Flashcards
state insurance regulatory systems have 4 features
licensing requirements
reporting & fiilng requirements
periodic examinations
power to impose sanctions
What is NAIC
US standard setting & regulatory support organization
coordinates regualtions of insurers when operating in multiple states
NAIC mission FProProPro (5)
- Fair consumer treatment
- Protect public interest
- Promote competition
- Promote solvency
- improve state insurance regulation
NAIC functions
- Maintain databases to track solvency
- Value insurer securities
- Assist states w/ pricing
- Advise on regulation
Define NAIC model law
NAIC suggests law for all states to follow as an option
states can adopt, modify ,or not use it at all
Why state regulator support certain NAIC model law
- Efficiency → no need to make another law
- Uniform regulation across states → helps multi-state insurers keep compliance costs↓ → easier for company to do business in your state
Why state regulator oppose certain NAIC model law
- Redundancy – similar law already exists
- Irrelevancy – law doesn’t address states special need
NAIC grants state DOI financial accreditation
3 steps for state to get accredited
- State commissioner at DOI requests NAIC review
- NAIC choose team to review
- Review = interviews, review laws/reports/policies
4 types of rate regulation from strongest to weakest
Prior approval
File & use (file before using)
Use & file (used immediately but file w/ in x days)
No file
What does state DOI do? (5)
- Licensing (insurers, producers)
- regulate coverage and pricing
- Solvency (financial exams)
- market conduct examinations
- determine need for receivership
Describe DOI market conduct exams
marketing, advertising,soliciting, policy issuing, claim handling
use NAIC handbook→uniform across states
Advantages of use and file state regulation of rates
- use and file- insurer can change rates quickly based on market conditions + regulator can still review rates & modify
Disadvantages of use and file in state regulation of rates
- cost to comply w/ different regulations in each state
- unfair rates can hit market before regulator looks at them
Describe regulatory financial exam
- NAIC handbook →uniform across states
Characteristics of ‘business of insurance as defined by Group Life & Health Ins co VS Royal Drug Co
- insurance is any activity w/ at least 1 of following (contract b/w insurer and insured, specific to insurance industry, spreads risk,)