Porter Ch. 2: Development of Insurance Regulation Flashcards Preview

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Flashcards in Porter Ch. 2: Development of Insurance Regulation Deck (39)
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1

First American property insurer

Philadelphia Contributorship for the Insurance of Houses from Loss by Fire (1752)

2

First state to charter insurers

Pennsylvania (1972)

3

Insurers, prior to Revolution

Had to obtain charters under British Crown

4

Insurers, post-Revolution

States passed laws prohibiting foreign insurers

5

First DOI

New York (1859); first to require insurers to maintain UEPR

6

Paul v. Virginia

States could continue to regulate own insurance market without violating constitution (not interstate commerce)

7

National Insurance Convention

Created in 1871: developed constitution for regulators, designed uniform accounting statement, adopted taxation guidelines, first model law

8

Multiline insurers, early 1900s

DOIs did not allow them; NY amended laws and allowed package policies, but still under separate insurers

9

Multiline insurers, 1930s and 40s

Need is there; allowed in 1945; companies created subsidiaries to write multi-lines

10

Insurance compacts

Formed to control rates:
PRO: Deter open/free competition
CON: Prevents insolvencies

11

Sherman Antitrust Act

1890; did not directly apply to insurers, but gave states motivation to pass antitrust laws against controlling rates

12

SEUA inception

Formed after states began to repeal antitrust laws (1940s); about 300 insurers in southeast

13

SEUA charges

Controlling 90% of fire/allied lines; fixing rates; boycott/coercion/intimidation; threatening consumers if didn't purchase insurance

14

SEUA hearing

Initially dismissed (Paul); Supreme Court noted each of activities subject to prosecution under Sherman if not insurance companies

15

Two key questions in SEUA case

1. Did Congress intend Sherman to prohibit insurer's conduct of monopolizing business?
2. Do insurance transactions across state lines constitute "commerce among several states" subject to Congressional regulation?

16

SEUA case conclusions

Insurance not distinct in states; not a single business conducting business across state line exempt from federal regulation; intangible products subject to federal regulation

17

SEUA result

Federal regulation now applied to insurance

18

Clayton Act

1914 - identified and made illegal practices that lessened competition (i.e. tying, price-discrimination)

19

Robinson-Patman Act

Amendment of Clayton Act, required price differences to be justified by reduced operating costs

20

Tying

Requiring purchase of one product to purchase another

21

Subcommittee on Federal Legislation

Sherman and Clayton amended to allow cooperative arrangements to establish adequate rates; Robinson-Patman amended to exclude insurance

22

McCarran-Ferguson Act

1945: Returned regulation of insurance back to states;

23

NAIC model rate regulation laws: purposes

Ensure rates were not excessive...
Allow cooperation in setting rates if not hindering competition

24

NAIC model rate regulation laws: actions

Required prior approval
Explained how to file
Described role of rating organizations
Recommended anti-rebating laws

25

NAIC model rate regulation laws: issues

Many states did not want prior approval laws and some wanted rebating

26

Act Relating to Unfair Methods of Competition

1947; certain activities unfair, deceptive

27

Guaranty Association Model Act

1969 - all states have guaranty funds (when insurers become insolvent)

28

Early Warning Tests program

1971 - essentially IRIS (1977)

29

NAIC accreditation program

1989 - creates similar financial solvency regulation standards in all states

30

National Flood Insurance Act

1968 - addressing affordability of flood insurance