Porter 5

Question 1

Describe two benefits of a file and use rating law for insurers

Answer 1

• reduces time and cost of changing rates, easier to be responsive
• allows insurer to be more innovative since less worry over disapproval

Question 2

Describe two benefits of a file and use rating law for insureds

Answer 2

• reduced cost can be passed on to insureds at lower rates

- those insureds benefiting from price decreases/ innovation benefit from quicker sped to market

Question 3

Describe two benefits of a file and use rating law for regulators

Answer 3

• allows regulator to focus on other areas such as solvency

- reduces resources needed since prior approval can be very costly

Question 4

Describe one advantage and one disadvantage for Prior Approval

Answer 4

Advantage: regulator has close surveillance of insurer and can protect insured
Disadvantage: delays in rate approvals that do not allow insurers to charge rates based on market trends

Question 5

Describe one advantage and one disadvantage for No File

Answer 5

Advantage: easy for insurer, less costs
Disadvantage: regulator has trouble monitoring

Question 6

Describe one advantage and one disadvantage for Use and File

Answer 6

Advantage: use rates immediately/ quick to market
Disadvantage: cost associated with completing a filing

Question 7

State 4 arguments for Elected Commissioners

Answer 7

• appointed subject to dismissal for cause which could make term uncertain
• appointed might continue regulating in the same manner as predecessor when a different approach is required
• appointed might or might not be as aware of public’s concerns
• appointed might feel inclined to yield to the interests of those responsible for the appointment

Question 8

State 4 arguments for Appointed Commissioners

Answer 8

• no need to campaign or raise funds for a campaign, so not unduly influenced by particular group
• experienced and knowledgeable person can be designated whereas an elected might not be knowledgeable about insurance
• less likely to be swayed by public opinion which may have an adverse effect on insurance regulation
• more likely to be perceived as a career state government employee interested in insurance regulation whereas an elected may be seen as a politician

Question 9

Identify 9 duties of the Insurance Commissioner

Answer 9

• overseeing operation of state insurance department
• promulgating orders, rules, and regulations necessary for admin of insurance laws
• determining whether to issue business licenses to new insurance companies, agents, and brokers, and other insurance entities
• reviewing insurance pricing and coverage
• handling hearings on insurance ins sues
• taking action when violations of insurance laws occur
• issuing an annual report on status of state’s insurance industry and department
• maintaining records of insurance department activities

Question 10

Briefly describe the four basic types of filing laws

Answer 10

• Prior approval: regulator must authorize rate or coverage filing before it can be used
• File and Use: must submit the rate or coverage to department before it can be used
• Use and File: company can go ahead and use the rate or coverage, provided that it is sent to regulator within a short period of time
• No File: not required to make a filing

Question 11

What are the most common reasons for rate or coverage disapproval?

Answer 11

• not in the public interest
• illegal
• unfairly discriminatory
• rate excessive, inadequate or not meeting minimum standards

Question 12

What are the basic purposes of a financial examination?

Answer 12

• 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 13

Briefly describe a market conduct examinations

Answer 13

• review of the ways in which insurers do business: advertising, soliciting, policy issuing, claims handling

Question 14

Name the two main reasons insurance department may not have a fraud unit

Answer 14

• restraints on budgets

- lack of insurance fraud laws

Question 15

State 3 reasons an insurance department will rehab an impaired insurer

Answer 15

• liabilities exceed assets
• insurance company refused to submit books, records, accounts or affairs to insurance department
• insurer has willfully violated its charter

Question 16

Give 3 examples of consumer services provided by regulators

Answer 16

• help with claims, complaints, and inquiries from the general public
• offer educational programs to inform policyholders about insurance and loss prevention
• publish information about guide for the purchase of insurance

Question 17

List 5 methods state insurance departments communicate with the insurance industry

Answer 17

• written material: informational newsletters and bulletins
• surveys of insurance companies
• advisory groups
• announce to news media
• annual reports

Question 18

Revenue for state insurance departments can come from many sources. List 5

Answer 18

• premium taxes
• fees and assessments
• appropriation from the state treasury
• fines and penalties
• services for which state insurance departments charge fees

Question 19

List 3 regulatory duties of an Insurance Commissioner

Answer 19

• promulgating regulations and rules necessary to enforce insurance laws
• licensing insurance companies and insurance producers
• reviewing insurers’ rates and forms

Question 20

Briefly describe a domestic insurer, foreign insurer, and alien insurer

Answer 20

• Domestic: incorporated in the state writing insurance business
• Foreign: licensed to operate in a state but incorporated in another state
• Alien: licensed in a U.S. state but incorporated in another country

Question 21

Briefly describe Receiver

Answer 21

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

Question 22

Briefly describe Receivership

Answer 22

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

Question 23

Briefly describe Rehabilitation

Answer 23

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 24

Briefly describe Liquidation

Answer 24

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