Week 7 Essay question Flashcards
What is week 7 and where is it?
The regulation of insurance and it is in the town centre
What do you talk about in essay 7?
Intro
Theories of regulation
(Public interest theory and Regulatory capture theory)
Areas in regulation
(Formation and licensing, solvency standards, rate regulation and sales regulation)
Points for and against regulation in insurance
Regulation framework
Conclusion
Public interest theory what will you talk about?
The government should use regulation in insurance to fix and secure the markets. There are many questions around public interest theory such as does the government know when to step in, do they know for example when or if they should increase or decrease tax policy (Insurance premiums tax), the aim is to benefit everyone.
What will you talk about in regulatory capture theory?
Its about the regulators who serve the industry, they should aim to protect markets and consumers, however they may be materialistic (financial capture) or non-materialistic (cultural or cognitive capture)
What might you mention in arguments for an against regulation?
For:
Increase market stability and competitive fairness
Allows for a fair spread of equity among big and smaller insurers
Avoids monopolies and can reduce fraud
Against:
IPT can have insurance costing more
Can restrict and insurers chance to grow
Can decrease their underwriting ability
What might you talk about in insurers failing reasons?
Insurance could fail due to an insufficient amount of reserve funding
Poor ability to underwriter and understand their consumers
Lack of reinsurance and financial capacity to pay of losses
What might you talk about in insurance framework?
PRA and FCA
PRA is about ensuring that insurers can pay of their losses and that they can afford to take the risks they take, avoiding systemic collapse
FCA is about the more focussed on consumer protection, encouraging insurance companies to compete and ensure markets are stable whilst pushing growth
