Exam 4 TF & MCQ Flashcards
(23 cards)
Traditional Definition of Risk
Uncertainty concerning the occurrence of a loss.
Duties of a CRO
- Oversee all aspects of ERM across the organization.
- Overcomes the “silo” effect by having broad view.
- Interview the risk owners throughout the organization
- Investment managers would own certain asset risk.
- Actuaries would own pricing/product management risk.
- Facilities managers would own hazard risk.
National Association of Insurance Commissioners (NAIC)
§ Voluntary participation by state insurance departments.
§ Goal is to encourage greater uniformity, cooperation, coordination of laws and regulations.
§ Model laws & regulations.
§ No authority beyond what states give it.
When must insurable interest exist?
– Property insurance: at the time of the loss
– Life insurance: only at inception of the policy
The two basic types of plans are:
1) Defined-benefit plans
2) Defined-contribution plans
Definition of Universal life insurance
A flexible premium policy that provides lifetime protection, similar to whole life
Universal Life Insurance
– After the first premium, the policyholder decides the amount and frequency of payments, as compared to whole life where premiums are fixed. (fixed in practice)
– Cash value does not follow a fixed schedule; it varies with:
– policyholder premium payments
– insurer expense and Cost of Insurance (mortality) charges
– rate insurer uses to credit interest to cash value.
* rate often linked to short term interest rates, subject to a minimum.
– The policies have considerable flexibility but can lapse if premiums and interest insufficient to pay charges.
Reasons for the increase in spending include:
Advances in technology- over ½ of cost increases
Cost insulation because of third-party payers
Employer-sponsored health insurance
Fee-for-service defects
High administrative costs
Lack of transparency in cost and quality information
State mandated benefits
Cost shifting by Medicare and Medicaid
Rising prices in the healthcare sector
Defensive medicine (avoid malpractice)
Problem 2: Many people do not have health insurance coverage
Why?
High cost of coverage.
Loss of job leading to loss of health benefits.
Loss of Medicaid coverage or ineligibility for coverage.
People not aware of subsidies under ACA.
Problem 3: Waste and inefficiency
Sources of wasteful spending include:
Duplication of tests
Medical errors that are largely preventable
Unnecessary tests - fear of lawsuits (“Defensive medicine”)
High admin costs and excessive / redundant paperwork
Readmissions into hospitals because of inadequate or ineffective initial treatment
Hospitalizations for preventable conditions
Fraud and overbilling by healthcare providers
Overuse of expensive medical technology and emergency rooms
Problem 4: Harmful insurer practices
Some insurer practices are harmful to both policyholders and applicants for insurance
Examples include:
Exclusions for preexisting conditions
Could be actuarially justified, but there are abuses.
The Affordable Care Act has these goals:
Improve availability of care.
Provide substantial subsidies to reduce cost.
Contain provisions to lower costs.
Establish healthcare exchanges.
What is Long-term care insurance?
Long-term care insurance pays a daily or monthly benefit for medical or custodial care received in a nursing facility, in a hospital, or at home
What are the two types of Coverages for Long-term care insurance?
Two types of coverage
Reimbursement policies
Indemnity policies (or per diem policies)
Life insurance or annuities may have LTC riders.
What are Reimbursement policies?
Reimbursement policies are the most common
These policies reimburse for actual charges up to a daily limit which can range from $50 – 350 or more
What are Indemnity policies?
(or per diem policies) pay a flat dollar amount per day regardless of actual expenses
Depending on the policy, L T C insurance policies cover a wide range of services including,
Nursing home care
Home healthcare
Respite care for a caregiver
Hospice care
Personal care in the home
Services in assisted living facilities, adult daycare centers, and other community services
The most common definitions of total disability are:
Inability to perform the material and substantial duties of
- your regular occupation
- your occupation, and are not engaged in any other occupation
- any occupation for which you are reasonably fitted by education, training, and experience
- any gainful occupation
Loss-of-income test, i.e., your income is reduced as a result of sickness or accident
What is a partial disability?
Partial disability means that you can perform some but not all of the duties of your occupation
- Insurance benefits at a reduced rate for a shorter period
What is a Residual disability?
Residual disability applies when you are gainfully employed and not totally disabled but, solely because of sickness or injury, your loss of income is at least 15 percent of your prior income
Insurance benefits a pro-rata level based on % loss of income
Individual Disability-Income Insurance
Benefit period is the length of time that disability payments are payable after the elimination period is met
Individual policies normally contain an elimination period (waiting period), during which time benefits are not paid
Most policies automatically include a waiver-of-premium provision
Policies typically include a rehabilitation provision
Group insurers follow certain fundamental underwriting principles so that the loss experience of the group overall is favorable:
Insurance is incidental to the group
Flow of persons through the group
Automatic determination of benefits
Minimum participation requirements
Efficient administration
