• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/28

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

28 Cards in this Set

  • Front
  • Back
List the six milestones in the evolution of insurance regulation
1. Paul v. Virginia: legal decision in 1869 that insurance is not interstate commerce
2. Sherman Antitrust Act: congressional act passed in 1890 that forbade monopolies formed through collusion and prevented insurers from controlling coverages and rates by banding together
3. Southeastern Underwriters decision: legal decision in 1944 that made insurance subject to federal regulation again
4. McCarran-Ferguson Act: passed in 1945, shifting most insurance regulation back to the states
5. Insurance Services Office (ISO) and the Attorneys General Lawsuit: lawsuit brought in 1988 that alleged the insurance industry associations and insurers colluded in writing restrictive policy language that led to the late 1980s liability insurance crisis
6. Gramm-Leach-Bliley Act (Financial Services Modernization Act): clarified that states have primary control over the insurance industry
The states primarily regulate the insurance industry - List three areas of federal regulation
(Memory Aid: FAB)
1. Federal laws applicable to the "business of insurance" override state laws applicable to the same activities
2. Antitrust laws at the federal level apply to states without antitrust laws
3. Boycott, intimidation, and coercion are prohibitied by federal law
List three advantages of federal regulation
(Memory Aid: HUM)
1.Higher-quality personnel as regulators due to higher salaries and prestige
2.Uniformity: uniform laws
3.More efficient: one agency versus 50 separate agencies
List five advantages of state regulation
(Memory Aid: DRAIN)
1. Decentralization of political power
2. Responsive to local needs
3. Already exists: weaknesses and strengths are already identified
4. Innovation: experimentation with new policies is easier at the state level
5. NAIC can provide uniformity of state laws through model laws
List the three main reasons why insurance is regulated
(Memory Aid: APE)
1. Avoid destructive competition
2. Protect consumers
3. Ensure insurer solvency
List the six roles of insurance regulators
(Memory Aid: PAIR US)
1. Policy language: set policy language
2. Ability to disapprove policies not meeting regulator's standards
3. Inform consumers regarding insurance matters
4. Review insurance policy forms
5. Unethical behavior: protect consumers against unethical behavior
6. Standards: set standards for coverage
List the seven areas of insurance regulation
1. Forming and licensing insurance companies
2. Licensing of insurance personnel
3. Solvency regulation
4. Rate regulation
5. Insurance policy regulation
6. Regulation of market conduct
7. Unofficial regulation
List the eight common characteristics of state guaranty funds
(Memory Aid: DUCT SCAM)
1. Deductible of $100 applies to most unpaid claims
2. Unearned premiums are generally refunded
3. Coverage of claims varies by state; however, only New Jersey covers surplus lines insurance or reinsurance
4. Termination: policies terminate within 30 days of the date of insurer became insolvent
5. Separate accounts are created for separate insurance lines
6. Claims are assessed only after the insurance company becomes insolvent (except in New York)
7. Assessment recovery varies among states: 32 states allow rate increases to recover assessments
8. Maximum limits are imposed on claims; typically the lesser of the policy limit or $300,000
List the six types of rating laws
(Memory Aid: UMP OFF)
1. Use-and-file law
2. Mandatory rate law
3. Prior approval law
4. Open competition system
5. Flex rating law
6. File-and-use law
Advisory organizations
Insurance advisory organizations work on behalf of insurance companies and are independent corporations
Alien insurer
Insurance company is located outside of the US; license must be renewed annually
Domestic insurer
Insurance company that conducts business in the state where the company is located; license does not expire
File-and-use law
Once rates are filed with the state insurance department, the rates may be used immediately
Flex rating law
Prior approval is madated only if the new rates surpass (or drop below) a certain percentage of prviously filed rates
Foreign insurer
Insurance company obtains licenses in states outside of the company's home state; license must be renewed annually
Guaranty funds
Funds established by states to cover the cost of unpaid claims of insolvent insurers licensed in the state
Mandatory rate law
Rates to be used by all licensed insurers in the state are set by the rating bureau or state agency
Model laws (draft bills)
Proposed wording for a new law that states may decide to adopt as is or adopt in a modified form
Model regulation
Draft of a regulation that an insurance department may implement if the model law is passed
National Association of Insurance Commissioners (NAIC)
Significantly affects state insurance regulation, although the NAIC is not a direct regulatory authority; provides a forum for uniform policy development and coordinates insurance regulation
Open competition system
Rates are not filed with the state insurance department
Prior approval law
Rates require state department approval prior to use
Rebating
Offering part of the producer's commission to an indiviual to entice the individual to purchase a policy
Risk retention group
Type of group captive that originated under the Liability Risk Retention Act of 1986; when licensed and chartered in one state, the group can practice in all states
Surplus lines laws
State laws allowing brokers or agents having a surplus lines license to write business for a nonadmitted insurance company if certain conditions are met
Underwriting cycle
Cyclical pattern of insurance pricing; a few years of a soft market followed by a few years of a hard market
Unfair trade practices acts
State laws forbidding an insurance company from engaging in unfair practices or acts and using unfair ways to compete
Use-and-file law
New rates may be used prior to filing the rate with the insurance department; subject to review once filed