Podcast
Questions and Answers
What is one major reason for regulating insurers?
What is one major reason for regulating insurers?
Which of the following areas is regulated when it comes to insurance?
Which of the following areas is regulated when it comes to insurance?
What is a domestic insurer?
What is a domestic insurer?
Which of the following is NOT a principal method for regulating insurers?
Which of the following is NOT a principal method for regulating insurers?
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What do rate regulations aim to ensure?
What do rate regulations aim to ensure?
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Which type of insurer is chartered by another state but licensed to operate in a different state?
Which type of insurer is chartered by another state but licensed to operate in a different state?
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What is the purpose of market conduct regulation?
What is the purpose of market conduct regulation?
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What is one method used for regulating insurance companies?
What is one method used for regulating insurance companies?
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Which form of rate regulation does NOT require insurers to file rates before use?
Which form of rate regulation does NOT require insurers to file rates before use?
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What is the primary purpose of state insurance commissioners approving policy forms?
What is the primary purpose of state insurance commissioners approving policy forms?
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What do all states mandate for agents and brokers in terms of professional development?
What do all states mandate for agents and brokers in terms of professional development?
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Which practice involves inducing a policy owner to replace an existing policy with minimal benefit?
Which practice involves inducing a policy owner to replace an existing policy with minimal benefit?
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What is rebating in the context of insurance sales practices?
What is rebating in the context of insurance sales practices?
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Which of the following is NOT a form of rate regulation for property and casualty insurance?
Which of the following is NOT a form of rate regulation for property and casualty insurance?
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Which category of insurance rates is generally not regulated by states?
Which category of insurance rates is generally not regulated by states?
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What is a common reason for the insolvency of insurers?
What is a common reason for the insolvency of insurers?
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What is a common regulatory requirement for large commercial accounts in many states?
What is a common regulatory requirement for large commercial accounts in many states?
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Which method is used to ensure the solvency of insurers?
Which method is used to ensure the solvency of insurers?
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What does the retaliatory tax protect domestic insurers from?
What does the retaliatory tax protect domestic insurers from?
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Which of the following is NOT considered a key part of solvency?
Which of the following is NOT considered a key part of solvency?
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What role do complaint divisions in insurance departments primarily serve?
What role do complaint divisions in insurance departments primarily serve?
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What can excessive claims cause regarding insurer operations?
What can excessive claims cause regarding insurer operations?
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How are the adequacy of reserves for claims significant to an insurer's stability?
How are the adequacy of reserves for claims significant to an insurer's stability?
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What is the primary focus of market conduct regulation?
What is the primary focus of market conduct regulation?
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What primary purpose do financial regulations serve for insurers?
What primary purpose do financial regulations serve for insurers?
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What determines an insurer's required risk-based capital (RBC)?
What determines an insurer's required risk-based capital (RBC)?
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Which statement is true regarding admitted assets?
Which statement is true regarding admitted assets?
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What is a common restriction imposed by states on participating life insurers?
What is a common restriction imposed by states on participating life insurers?
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What action may state insurance departments take for insurers identified as financially impaired?
What action may state insurance departments take for insurers identified as financially impaired?
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How do investment regulations impact insurers?
How do investment regulations impact insurers?
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What method is primarily used to raise funds for unpaid claims from insolvent insurers?
What method is primarily used to raise funds for unpaid claims from insolvent insurers?
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What does the comparison of a company's total adjusted capital to required RBC indicate?
What does the comparison of a company's total adjusted capital to required RBC indicate?
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Study Notes
Government Regulation of Insurance
- Insurance regulation aims to maintain insurer solvency, compensate for inadequate consumer knowledge, ensure reasonable rates, and make insurance available.
- Key methods of regulating insurers include legislation (state laws), court decisions (interpreting policy provisions), and state insurance departments.
- States regulate insurer formation and licensing, including minimum capital and surplus requirements.
- Insurers must adhere to financial regulations ensuring sufficient assets to cover liabilities. Admitted assets and reserve calculations are crucial.
- Life and health insurers must meet risk-based capital (RBC) standards, considering asset risk, underwriting risk, interest rate risk, and business risk.
- Investment regulations prevent insurers from making unsound investments, protecting policyholders. Asset categories such as real estate may be limited.
- Participating life insurers' surplus accumulation might be restricted instead of dividend payments.
- Insurers must file annual reports, and state insurance departments oversee financially impaired companies.
- Guarantees funds, laws, and associations protect policyholders of insolvent insurers.
- Assessment methods are used to raise funds for unpaid claims.
- Rate regulation varies, with forms such as prior approval, modified prior approval, file-and-use, use-and-file, flex-rating, state-made rates, and no filing required.
- Large commercial accounts are sometimes exempt from rate filing in some states.
- State insurance commissioners approve/disapprove new policy forms.
- Sales practices, including licensing of agents/brokers and continuing education, are regulated.
- Unfair trade practices like twisting (inducing policy change) and rebating (unstated premium reductions) are prohibited.
- Insurance departments often have complaint divisions to handle consumer complaints.
- Insurers pay various taxes (local, state, federal) and retaliatory taxes are used.
- Insolvency issues are a key concern.
- Insolvency reasons can include inadequate rates, insufficient reserves, rapid growth issues, mismanagement and fraud, bad investments, affiliate problems, overstated assets, catastrophe losses, and reinsurer failure.
- Key solvency parts include capital requirements, risk management, corporate governance, group supervision, reinsurance, and statutory accounting/financial reporting.
- Methods to ensure solvency are minimum capital/surplus requirements, risk-based capital standards, reserve requirements, investment restrictions, review of financial statements, field examinations, early warning systems (IRIS ratios), and FAST system analysis.
- Market conduct regulation focuses on how insurers interact with customers. This includes sales, advertising, underwriting, premium collection, policy changes, and claims settlement.
- Regulators are concerned about unsuitable products, misrepresentation, sales pressure, excessive/discriminatory rates, claims denial, and policy termination issues.
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Description
This quiz covers the key aspects of insurance regulation, focusing on maintaining insurer solvency and consumer protection. It explores the methods of regulating insurers, including state laws and financial requirements. Understanding these regulations is essential for anyone studying the insurance industry.
