Porter Ch. 5: State DOI Operations Flashcards
Day-to-day regulation of insurance
Done by executive branch of government, either by separate division or a subunit
State DOI Departments and Functions
Licensing
Regulating coverage and pricing
Four types of filing laws
Prior approval
File and use
Use and file
No file
Prior approval
Must be approved by state DOI before they can be used; most states have for coverage, half for rates
File and use
Must file rates with state DOI but can use immediately
Use and file
Insurer can use rate it want, provided they are filed within specific period after use
No file
Insurer not required to make filing of rate or coverage
Most common reasons for rate or coverage disapproval
Not in public interest
Illegal
Unfairly discriminatory
Inadequate, excessive, not meeting minimum standards
Reasons against prior approval
Competition will keep rates in line
Basic purposes of financial exam
Detect AS EARLY AS POSSIBLE trouble or impropriety;
Develop info needed for timely, appropriate regulatory action
Financial exam pieces
Annual audits by independent CPAs
Annual Statement
Conducted every few years
Review statistical statements, accounting procedures, management practices, investment procedures
Market conduct exams
Reviews ways in which insurers do business (advertising, soliciting, policy issuing, claims handling)
Market Conduct Examiners Handbook, four key areas
Model guide for:
1) Sales and advertising
2) UW
3) Pricing
4) Claims
Omnibus Crime Control and Safe Streets Act
1994 - addressed insurance fraud (made it illegal), established multi-state approach to anti-fraud activity
Receiver
Disinterested person/business appointed to receive, protect, and account for money or other property due
Receivership
Type of bankruptcy an insurer enters into when a receiver is appointed to manage the insurer and its property
Rehabilitation
Process of reorganizing an insurer’s financial affairs so it can continue to exist, with creditors satisfying claims from future earnings
Liquidation
Bankrupt organization does not have enough assets to pay creditors; creditors prioritized and paid out
Grounds for rehabilitation
Liabilities > assets
Insurance company refuses to submit information to DOI
Insurance company intentionally violates charter or law
Advantages, file and use
Reduces time and cost of changing rates
Allows insurer to be more innovative (less worry over disapproval)
Advantages, prior approval
Regulator has close surveillance of insurer
Can better protect insured
Disadvantages, prior approval
Delays in rate approvals
Advantages, no file
Less costs for insurer
Disadvantages, no file
Regulator has trouble monitoring
Advantages, use and file
Use rates immediately
Quick to market
Disadvantages, use and file
Cost associated with completing a filing
