Porter Ch 8 Flashcards Preview

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Flashcards in Porter Ch 8 Deck (11):
1

Initial Primary purpose of Rate regulation:

Financial stability of the insurer

2

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

3

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

4

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

5

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

6

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

7

Describe the degree of rate regulation and rationale for
surety

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

8

Describe the degree of rate regulation and rationale for
title insurance

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

9

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

-General regulation, except during tight markets
-Sophisticated buyers

10

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

11

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