G.1.4. Porter Chapter 5

Question 1

Briefly describe 4 Types of Filing Laws:

Answer 1

1. Prior approval - Insurance rates and coverages must be approved by the state insurance department before they can be used in the state
2. File and use - Insurer must file insurance rates or coverages with the state insurance department but can then use them immediately
3. Use and file - Insurer can use the rate or coverage it wants, provided the insurer files the rate or coverage within a specified period after it is put into use
4. No file - Insurer not required to make a filing of the rate or coverage

Question 2

Purpose of insurance regulation:

Answer 2

Assure that the future performance promise, to pay a claim, will be fulfilled as needed (Protects the public interest)

Question 3

Describe the basic purposes of a financial examination:

Answer 3

• 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

Question 4

List some of the most common reasons for rate or coverage disapproval:

Answer 4

• Not in the public interest
• Illegal
• Unfairly discriminatory
• Other - excessive, inadequate or not meeting minimum standards

Question 5

Briefly describe a market conduct examination.

Answer 5

Review of the ways in which insurers do business - advertising, soliciting, policy issuing, claims handling

Question 6

What is reviewed in the financial examination:

Answer 6

Insurer’s statistical statements, accounting procedures,financial statements, financial controls, management practices, and investment procedures

Question 7

How did the 1994 Omnibus Crime Control and Safe Streets Act address insurance fraud:

Answer 7

• Made it illegal to defraud, loot, or plunder an insurer

- Established a multi-state approach to anti fraud activity

Question 8

2 reasons why only a few states have historically had fraud departments:

Answer 8

1. Restraints on budgets

2. Lack of insurance fraud laws

Question 9

Briefly describe a “Receivership”

Answer 9

Type of bankruptcy an insurer enters into when a receiver is appointed to manage the insurer and its property

Question 10

Briefly describe a “Receiver”

Answer 10

Disinterested person/business appointed to receive, protect, and account for money or other property due

Question 11

Briefly describe a “Liquidation”

Answer 11

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

Question 12

Briefly describe a “Rehabilitation”

Answer 12

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

Question 13

List potential grounds for rehabilitation:

Answer 13

• Liabilities exceed assets
• Insurance company refused to submit books, records, accounts or affairs to insurance department
• Insurer willfully violates its charter or any other state law

Question 14

Consumer services provided by regulators

Answer 14

• Help with claims, complaints and inquiries from the general public
• Offer educational programs
• Publish information about guides for purchase of insurance