G.1.6. Porter Chapter 8 Flashcards Preview

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Flashcards in G.1.6. Porter Chapter 8 Deck (13):
1

Briefly describe two purposes of rate regulation

1. Insurer financial stability which results in consumer protection
2. Pricing insurance so that it is fair, equitable, and affordable

2

Initial Primary purpose of Rate regulation:

Financial stability of the insurer

3

Provide 4 Statement of Principles of P/C Ratemaking:

1. A rate is an estimate of the expected value of future costs
2. A rate provides for all costs associated with the transfer of risk
3. A Rate provides for the costs associated with an individual risk transfer
4. A rate is reasonable and not excessive, inadequate, or unfairly discriminatory if it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer

4

Briefly explain the political theory of regulation

Regulatory attention can be greatest for issues that attract substantial voter interest and are easy for policymakers to understand

5

Describe the degree of rate regulation and rationale for ocean marine insurance

-Very little regulation
-Highly individualized risks
-No statistical info to justify rates
-Knowledgeable buyers and sellers

6

Describe three ways in which the insurance product is unique

-Insurers set rates before the actual costs are known
-Regulatory environment different by state
-Insurance industry has many information-sharing and joint product-development mechanisms

7

Describe the degree of rate regulation and rationale for title insurance

-Rate manuals filed, little regulatory review
-No stat plan or ratemaking data
-Few rating or risk evaluation factors
-Underwriting and exposure identification key to controlling losses
-Driven more by business expense than by insured losses

8

Describe the degree of rate regulation and rationale for surety

-Rate manuals filed, little regulatory review
-Less detailed stat plan and ratemaking data
-Fewer statistically based rating factors
-Subjective risk evaluation
-Less credible loss experience

9

Describe the degree of rate regulation and rationale for private passenger auto

-Often regulatory review of overall rates and details of rating plan
-Legally required or socially desirable for consumers to purchase
-Uninformed consumers
-Highly uniform stat plan with credible rate data
-Complex rates and classication system

10

Describe the degree of rate regulation and rationale for commercial general liability:

-General regulation, except during tight markets
-Sophisticated buyers

11

Difference between Statistical Agent and Rating bureau:

-Statistical agents/ Advisory organizations: collect and report loss experience
-Rating bureaus: prepare rate filings and submit to regulators on behalf of members

12

Describe the degree of rate regulation and rationale for workers compensation

-Close regulation, prior approval of rates and classification system
-Legally required of most employers
-Costly, widespread business
-Complex rating and classication system

13

Describe the degree of rate regulation and rationale for inland marine

-Generally only informational filings needed
-Highly individualized risks
-No stat info to justify rates
-Diverse coverages and classifications