Chapter 8 Vocab (Text) Flashcards Preview

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Flashcards in Chapter 8 Vocab (Text) Deck (23):
1

Admitted Assets

assets that the insurer can show on its statuatory balance sheet in determining its financial condition

2

Alien Insurer

insurance company chartered by a foreign country and meeting certain licensing requirements

3

Assessment Method

the major method used to raise the necessary funds to pay unpaid claims

4

Credit-Based Insurance Score

majority of insurer's use applicants credit record for purposes of underwriting and rating in the auto and homeowners insurance

5

Domestic Insurer

insurer domiciled in the state; it must be licensed in the state as well as in other states where it does business

6

File and Use Law

Law for regulating insurance rates under which companies are required only to file the rates with the state insurance department before putting them into effect

7

Flex-Rating Law

Type of rating law in which prior approval of the rates is required only if the rates exceed a certain percentage above and below the rates previously filed

8

Financial Modernization Act of 1999

A federal law that allows banks, insurers, investment firms, and other financial institutions to enter and compete in each other's financial markets

9

Foreign Insurer

Insurance company chartered by one state but licensed to do business in another

10

McCarran-Ferguson Act

1945, states that continued regulation and taxation of the insurance industry by the states are in the public interest

11

Modified Prior-Approval Law

a state rating law where rate changes are based solely on loss experience; the rates must be filed with the state insurance department and can be used immediately. however, if the rate change is based in rate classification or expense relationship, prior approval of the rates is necessary.

12

National Association of Insurance Commissioners

meets periodically to discuss industry problems that might require legislation or regulation

13

No Filing Required

Rating law where insurers are not required to file their rates with the state insurance department to file their rates with the state insurance department but may be required to furnish rate schedules and supporting data to state officials

14

Paul v Virginia

1868 Landmark legal decision that affirmed the right of the states to regulate insurance

15

Policyholders' surplus

difference between an insurance company's assets and its liabilities

16

Prior-Approval Law

law for regulating insurance rates under which the rates must be filed and approved by the state insurance department before they can be used

17

Rebating

a practice, illegal in almost all states, of giving a premium reduction or some other financial advantage to an individual as an inducement to purchase the policy

18

Reserves

liability items on an insurer's balance sheet and reflect obligations that must be met in the future

19

Risk Based Capital (RBC)

Under NAIC standards, insurers are required to have a certain amount of capital that is based on the riskiness of their investments and operations

20

South Eastern Underwriters Association

cooperative rating bureau that was found guilty of price fixing and other violations of the Sherman Antitrust Act

21

Systemic Risk

Risk of collapse of an entire financial system or financial market in which the failure of a single entity or group of entities can result in the breakdown of the entire financial system

22

Twisting

Illegal practice of inducing a policyholder to drop an existing policy in one company and then replace it with a new policy in another company through misrepresentation or incomplete information

23

Use and File Law

A rating law that is a variation of a file and use; insurers can put into effect immediately any rate changes, but the rates must be filed with regulatory authorities within a certain period after first being used