R.M. Ch. 8

Question 1

Reasons for Insurance Regulation

Answer 1

• Maintain insurer solvency
• Compensate for inadequate consumer
• Ensure Reasonable Rates
• Make insurance Available

Question 2

Domestic Insurer

Answer 2

is domiciled in the state

Question 3

Foreign Insurer

Answer 3

is an out-of-state insurer that is chartered by another state, but licensed to operate in the state

Question 4

Alien Insurer

Answer 4

is an insurer that is chartered by a foreign country, but is licensed to operate in the state

Question 5

3. Rate Regulation

Answer 5

Forms of rate regulation for property and casualty insurance include:

• Prior approval
• File-and-use law
• Use-and-file law
• Flex Rating law
• State made rates
• open competition (no filing required)

Question 6

Prior Approval Law

Answer 6

rates must be filed and approved by the state insurance department before they can be used

Question 7

File-and-Use Law

Answer 7

insurers are required only to file the rates with the state insurance department, and the rates can be used immediately

Question 8

Use-and-File Law

Answer 8

insurers can put into effect immediately any rate changes, but the rates must be filed with the regulatory authorities within a certain period after being used

Question 9

Flex-Rating Law

Answer 9

prior approval of rates is required only if the rate increase or decrease exceeds a specified range

Question 10

State made rates

Answer 10

insurers are free to determine their own rates

Question 11

No Filing Required

Answer 11

insurers are not required to file their rates with the state insurance department

Question 12

Operation of Guaranty Funds

Answer 12

• Established by every state
• Pay policyholder claims of insolvent insurers, subject to limits
• Funded by insurers via an assessment method