Porter 5 Flashcards
Describe two benefits of a file and use rating law for insurers
- reduces time and cost of changing rates, easier to be responsive
- allows insurer to be more innovative since less worry over disapproval
Describe two benefits of a file and use rating law for insureds
- reduced cost can be passed on to insureds at lower rates
- those insureds benefiting from price decreases/ innovation benefit from quicker sped to market
Describe two benefits of a file and use rating law for regulators
- allows regulator to focus on other areas such as solvency
- reduces resources needed since prior approval can be very costly
Describe one advantage and one disadvantage for Prior Approval
Advantage: regulator has close surveillance of insurer and can protect insured
Disadvantage: delays in rate approvals that do not allow insurers to charge rates based on market trends
Describe one advantage and one disadvantage for No File
Advantage: easy for insurer, less costs
Disadvantage: regulator has trouble monitoring
Describe one advantage and one disadvantage for Use and File
Advantage: use rates immediately/ quick to market
Disadvantage: cost associated with completing a filing
State 4 arguments for Elected Commissioners
- appointed subject to dismissal for cause which could make term uncertain
- appointed might continue regulating in the same manner as predecessor when a different approach is required
- appointed might or might not be as aware of public’s concerns
- appointed might feel inclined to yield to the interests of those responsible for the appointment
State 4 arguments for Appointed Commissioners
- no need to campaign or raise funds for a campaign, so not unduly influenced by particular group
- experienced and knowledgeable person can be designated whereas an elected might not be knowledgeable about insurance
- less likely to be swayed by public opinion which may have an adverse effect on insurance regulation
- more likely to be perceived as a career state government employee interested in insurance regulation whereas an elected may be seen as a politician
Identify 9 duties of the Insurance Commissioner
- overseeing operation of state insurance department
- promulgating orders, rules, and regulations necessary for admin of insurance laws
- determining whether to issue business licenses to new insurance companies, agents, and brokers, and other insurance entities
- reviewing insurance pricing and coverage
- handling hearings on insurance ins sues
- taking action when violations of insurance laws occur
- issuing an annual report on status of state’s insurance industry and department
- maintaining records of insurance department activities
Briefly describe the four basic types of filing laws
- Prior approval: regulator must authorize rate or coverage filing before it can be used
- File and Use: must submit the rate or coverage to department before it can be used
- Use and File: company can go ahead and use the rate or coverage, provided that it is sent to regulator within a short period of time
- No File: not required to make a filing
What are the most common reasons for rate or coverage disapproval?
- not in the public interest
- illegal
- unfairly discriminatory
- rate excessive, inadequate or not meeting minimum standards
What are the basic purposes of a financial examination?
- detect as early as possible those insurers in financial trouble and/or engaging in unlawful and improper activities
- develop the information needed for timely, appropriate regulatory action
Briefly describe a market conduct examinations
- review of the ways in which insurers do business: advertising, soliciting, policy issuing, claims handling
Name the two main reasons insurance department may not have a fraud unit
- restraints on budgets
- lack of insurance fraud laws
State 3 reasons an insurance department will rehab an impaired insurer
- liabilities exceed assets
- insurance company refused to submit books, records, accounts or affairs to insurance department
- insurer has willfully violated its charter
Give 3 examples of consumer services provided by regulators
- help with claims, complaints, and inquiries from the general public
- offer educational programs to inform policyholders about insurance and loss prevention
- publish information about guide for the purchase of insurance
List 5 methods state insurance departments communicate with the insurance industry
- written material: informational newsletters and bulletins
- surveys of insurance companies
- advisory groups
- announce to news media
- annual reports
Revenue for state insurance departments can come from many sources. List 5
- premium taxes
- fees and assessments
- appropriation from the state treasury
- fines and penalties
- services for which state insurance departments charge fees
List 3 regulatory duties of an Insurance Commissioner
- promulgating regulations and rules necessary to enforce insurance laws
- licensing insurance companies and insurance producers
- reviewing insurers’ rates and forms
Briefly describe a domestic insurer, foreign insurer, and alien insurer
- Domestic: incorporated in the state writing insurance business
- Foreign: licensed to operate in a state but incorporated in another state
- Alien: licensed in a U.S. state but incorporated in another country
Briefly describe Receiver
disinterested person/business appointed to receive, protect, and account for money or other property due
Briefly describe Receivership
type of bankruptcy an insurer enters into when a receiver is appointed to manage the insurer and its property
Briefly describe Rehabilitation
process of reorganizing an insurer’s financial affairs so it can continue to exist as a financial entity, with creditors satisfying their claims from its future earnings
Briefly describe Liquidation
bankruptcy proceeding in which a bankrupt organization does not have enough assets to pay all creditors, and the creditors are prioritized and paid according to the types of their claims
