G.1.3. Porter Chapter 4

Question 1

List 4 sources of State Insurance Law:

Answer 1

1. Legislative Branch
2. Executive Branch (DOI and Attorney General)
3. Judicial Branch (State Court System)
4. State Insurance Regulatory Systems

Question 2

Law requires commissioner to submit an annual report to legislature which summarizes activities of department and status of insurance industry in state. State four requirements of this report.

Answer 2

1. Statement of income and expenses of the insurance department
2. Exhibit summarizing the financial status and business transactions of licensed insurers in state
3. Listing of insurers closed for that business year
4. Names of insurance companies in receivership or other official financial diffculty with a brief explanation of status
5. Recommendations by insurance commissioner about
   insurance laws and the department’s operations

Question 3

How do State Legislatures influence insurance regulation:

Answer 3

1. Often directly control DOI budgets

2. Pass the insurance laws that insurance commissioners must enforce

Question 4

List 4 features of a typical State Insurance Regulatory System:

Answer 4

1. Licensing requirements
2. Reporting and filing requirements
3. Periodic examinations
4. Power to impose sanctions

Question 5

List areas of Legislative Influence Through Noninsurance Laws:

Answer 5

• Banking
• Contracts
• Premiums (e.g., premium financing)
• Fraud
• Investments
• Lobbying

Question 6

List some activities of the National Conference of Insurance Legislators (NCOIL):

Answer 6

• Educating legislators on insurance issues
• Helping communications between state legislators on insurance issues
• Improving insurance regulation
• Asserting legislators’ prerogative in making state insurance policy
• Speaking about Congressional initiatives that might affect state insurance regulation

Question 7

List some examples of ways that NAIC staff supports state insurance regulatory officials

Answer 7

• Supporting NAIC’s committees and task forces
  -Maintain databases to help regulators track financial adequacy of insurers
• Scrutinizing alien EandS insurers seeking to do business in U.S.
  -Supporting individual state insurance regulators in court
  cases by issuing “friend of the court” supportive briefs
  -Valuing insurers’ securities

Question 8

List the NAIC fundamental insurance regulatory objectives

Answer 8

-Protect the public interest
-Promote competitive markets
-Facilitate the fair and equitable treatment of insurance
consumers
-Promote the reliability, solvency, and financial solidity of
insurance institutions
-Support and improve state regulation of insurance

Question 9

3 Reasons some model laws are changed or never adopted by states:

Answer 9

1. State may view as inappropriate or unnecessary due to
   coverage in other state laws
2. Legislators might decide to modify a model law to meet their states’ particular needs or better match other laws
3. Legislature considers many matters and may see NAIC
   model law as just another agenda item

Question 10

3 Advantages of Model Laws, Regulations, and Guidelines

Answer 10

1. Model laws help legislative bodies streamline their legislative development process
2. NAIC model laws help guide states in adopting the same or similar insurance laws, regulations, and guidelines
3. Insurers can benefit from legal uniformity among the states

Question 11

List the 3 Standards of Financial Regulation that need to be met to be accredited

Answer 11

• Laws and regulations used by the state must meet certain basic standards of NAIC models
• Regulatory methods of the state must be acceptable
• Department practices must be adequate

Question 12

What does the NAIC Review of a state seeking accreditation involve

Answer 12

-Interviewing department personnel
-Reviewing laws and regulations
-Reviewing prior examination reports
-Inspecting regulatory files for selected companies
-Reviewing organizational and personnel policies
-Gain understanding of document and communication flows
-Discussing comments and findings from the review
-Conducting closing conference with the state to discuss
findings and prepare a report

Question 13

2 reasons that many states have concerns with NAIC accreditation program:

Answer 13

1. May create resentment due to some legislators who may feel accreditation usurps legislative authority
2. Additional and revised model law requirements create a continual need for new legislation

Question 14

Fundamental and examples in NAIC

Answer 14

• Public interest–>special reports on insurance issues such as redlining and auto comp
• Competition–>model laws, regulations and guidlines promote uniformity among states
• Equitable–>Complaints data base system
• Reliability–>computerized databases to help regulators track insurer’s financial solvency
• Support improve reg–>accreditation program