MC 160 Foundations of Insurance
Regulation
Risk - ✔️✔️This is a condition in which more than one outcome is possible.
Peril - ✔️✔️an event that causes a loss, such as hostile fires, earthquakes, windstorms
and premature death.
Pure risk - ✔️✔️This involves no chance of economic gain and uncertainty about
whether a financial loss will occur and possibly how much that financial loss will be
Speculative risk - ✔️✔️This involves the chance of gain or loss and, in theory, is not
insurable. (Gambling)
The types of captive arrangements - ✔️✔️- Pure Captive
- Group Captive
- Segregated Cell Captive
- Association Captive
Group Captive - ✔️✔️When multiple businesses jointly form a subsidiary captive
insurer that insures some or all of the business risks of the member businesses (or
group).
Segregated cell captive - ✔️✔️When each group members risk is partially or fully
segregated from the risks of the other group members.
Association Captive - ✔️✔️This is when an association forms a captive to insure the
risks of the association members.
-Typically only provide coverage to the members of the association.
-primarily write P&C coverages though there is now movement for health and life
Casualty Insurance - ✔️✔️Also known as liability insurance.
-Provides coverage to a person or a business for negligent acts that cause bodily injury
or property damage to others.
-Some common types are: errors and omissions, fidelity, and various types of
malpractice insurance.
-Homeowners and auto insurance are examples
Health Insurance - ✔️✔️Provides coverage to a person for medical expenses.
-expenses can include emergencies, hospital stays, physician visits, medications, and
other related medical expenses.
,-The most common health insurance plans are comprehensive (or group) coverage
plans such as Health Maintenance Organization (HMO), Preferred Provider
Organization (PPO), Indemnity, and other company sponsored major medical plans.
-Supplemental or Limited Benefit plans include coverage such as dental, vision, or
specified disease/illness.
Life Insurance - ✔️✔️Provides a sum of money to a beneficiary when the insured dies.
-The owner of the policy must suffer a genuine loss if the insured dies.
-Whole _____ policies pay the death benefit whenever the insured dies no matter what
age.
- Term _____ policy pays a death benefit only if the insured dies within the "term" or
time window of the policy.
-The premiums for a term policy are much lower than whole.
-Universal_____ and Variable_____ are policies that provide management and
investment opportunities
for whole _____ policies.
Annuities - ✔️✔️-systematically liquidate a certain sum.
-The insurer agrees to pay the annuitant a certain sum of money for a specified period
of time.
-The objective is to protect the annuitant against outliving other sources of income.
-combined with Life contingencies only pay as long as the annuitant is alive.
Treaty Reinsurance - ✔️✔️A form of reinsurance where the insurer and reinsurers
agree in advance that certain lines or classes of business will be seeded or transferred
to the reinsurer.
Facultative Reinsurance - ✔️✔️A form of reinsurance that is is individually
underwritten.
-normally written on a case by case basis and involve an unusual risk or large risk.
-The insurer may only seek the this in the event that unusual risk can't be transferred to
other risk.
-may be a pro-rata type reinsurance model.
Pro rata reinsurance - ✔️✔️A type of reinsurance in which the primary insurer and
reinsurer proportionately share the amounts of insurance, policy premiums, and losses
(including loss adjustment expenses)
DOI: Financial Surveillance - ✔️✔️AKA: financial regulation, company supervision,
financial examination.
-reviews a company's financial solvency.
-ensure the carrier's capital requirements are met.
-may also be responsible for the licensing of state regulated entities.
-Collect and analyze (desk audits) of financial data
- Classify and identify troubled companies
-Review company transactions
, - Financial Examinations
- Company Licensing
DOI: Market Conduct - ✔️✔️- Review and analyze nonfinancial data
- Market Analysis
- Market Conduct
- Examinations
DOI: Agent Licensing - ✔️✔️- Licensing and Admissions of Agents and Brokers
DOI: Rates and Forms - ✔️✔️- Life/Health Policy Form and Premium Rate review
- Property/ Casualty Policy Form and Premium Rate review
- SERFF
DOI: Consumer Protection - ✔️✔️- Complaints
- Medicare/ Medicaid
DOI: Other Functions - ✔️✔️- Legal
- Public Affairs
- Legislative Policy
- HR
- IT
- Accounting
- SIU
Financial regulation - ✔️✔️This focuses on quantitative measurements by analyzing an
insurance carrier's financial solvency and ability to pay claims owed to consumers.
DOI and NAIC. - ✔️✔️Their relationship includes:
-NAIC performs many functions on behalf of the states
-NAIC website has tools that allow states to share info such as past exams, contact
information, premium information, and market analysis information.
-NAIC also creates model laws with the help of regulators.
The business of insurance - ✔️✔️This is interpreted by the courts by analyzing three
factors:
1. Transferring or spreading a policy-holder's risk.
2. Integral part of the policy relationship between the insurer and the insured.
3. Limited to entities within the insurance industry.
the four elements of an insurance contract - ✔️✔️1. Agreement - offer and acceptance.
2. Capacity to contract - ability to make legally binding agreements.
3. Consideration - promisor must receive a legal benefit such as money.
4. Legal purpose
Regulation
Risk - ✔️✔️This is a condition in which more than one outcome is possible.
Peril - ✔️✔️an event that causes a loss, such as hostile fires, earthquakes, windstorms
and premature death.
Pure risk - ✔️✔️This involves no chance of economic gain and uncertainty about
whether a financial loss will occur and possibly how much that financial loss will be
Speculative risk - ✔️✔️This involves the chance of gain or loss and, in theory, is not
insurable. (Gambling)
The types of captive arrangements - ✔️✔️- Pure Captive
- Group Captive
- Segregated Cell Captive
- Association Captive
Group Captive - ✔️✔️When multiple businesses jointly form a subsidiary captive
insurer that insures some or all of the business risks of the member businesses (or
group).
Segregated cell captive - ✔️✔️When each group members risk is partially or fully
segregated from the risks of the other group members.
Association Captive - ✔️✔️This is when an association forms a captive to insure the
risks of the association members.
-Typically only provide coverage to the members of the association.
-primarily write P&C coverages though there is now movement for health and life
Casualty Insurance - ✔️✔️Also known as liability insurance.
-Provides coverage to a person or a business for negligent acts that cause bodily injury
or property damage to others.
-Some common types are: errors and omissions, fidelity, and various types of
malpractice insurance.
-Homeowners and auto insurance are examples
Health Insurance - ✔️✔️Provides coverage to a person for medical expenses.
-expenses can include emergencies, hospital stays, physician visits, medications, and
other related medical expenses.
,-The most common health insurance plans are comprehensive (or group) coverage
plans such as Health Maintenance Organization (HMO), Preferred Provider
Organization (PPO), Indemnity, and other company sponsored major medical plans.
-Supplemental or Limited Benefit plans include coverage such as dental, vision, or
specified disease/illness.
Life Insurance - ✔️✔️Provides a sum of money to a beneficiary when the insured dies.
-The owner of the policy must suffer a genuine loss if the insured dies.
-Whole _____ policies pay the death benefit whenever the insured dies no matter what
age.
- Term _____ policy pays a death benefit only if the insured dies within the "term" or
time window of the policy.
-The premiums for a term policy are much lower than whole.
-Universal_____ and Variable_____ are policies that provide management and
investment opportunities
for whole _____ policies.
Annuities - ✔️✔️-systematically liquidate a certain sum.
-The insurer agrees to pay the annuitant a certain sum of money for a specified period
of time.
-The objective is to protect the annuitant against outliving other sources of income.
-combined with Life contingencies only pay as long as the annuitant is alive.
Treaty Reinsurance - ✔️✔️A form of reinsurance where the insurer and reinsurers
agree in advance that certain lines or classes of business will be seeded or transferred
to the reinsurer.
Facultative Reinsurance - ✔️✔️A form of reinsurance that is is individually
underwritten.
-normally written on a case by case basis and involve an unusual risk or large risk.
-The insurer may only seek the this in the event that unusual risk can't be transferred to
other risk.
-may be a pro-rata type reinsurance model.
Pro rata reinsurance - ✔️✔️A type of reinsurance in which the primary insurer and
reinsurer proportionately share the amounts of insurance, policy premiums, and losses
(including loss adjustment expenses)
DOI: Financial Surveillance - ✔️✔️AKA: financial regulation, company supervision,
financial examination.
-reviews a company's financial solvency.
-ensure the carrier's capital requirements are met.
-may also be responsible for the licensing of state regulated entities.
-Collect and analyze (desk audits) of financial data
- Classify and identify troubled companies
-Review company transactions
, - Financial Examinations
- Company Licensing
DOI: Market Conduct - ✔️✔️- Review and analyze nonfinancial data
- Market Analysis
- Market Conduct
- Examinations
DOI: Agent Licensing - ✔️✔️- Licensing and Admissions of Agents and Brokers
DOI: Rates and Forms - ✔️✔️- Life/Health Policy Form and Premium Rate review
- Property/ Casualty Policy Form and Premium Rate review
- SERFF
DOI: Consumer Protection - ✔️✔️- Complaints
- Medicare/ Medicaid
DOI: Other Functions - ✔️✔️- Legal
- Public Affairs
- Legislative Policy
- HR
- IT
- Accounting
- SIU
Financial regulation - ✔️✔️This focuses on quantitative measurements by analyzing an
insurance carrier's financial solvency and ability to pay claims owed to consumers.
DOI and NAIC. - ✔️✔️Their relationship includes:
-NAIC performs many functions on behalf of the states
-NAIC website has tools that allow states to share info such as past exams, contact
information, premium information, and market analysis information.
-NAIC also creates model laws with the help of regulators.
The business of insurance - ✔️✔️This is interpreted by the courts by analyzing three
factors:
1. Transferring or spreading a policy-holder's risk.
2. Integral part of the policy relationship between the insurer and the insured.
3. Limited to entities within the insurance industry.
the four elements of an insurance contract - ✔️✔️1. Agreement - offer and acceptance.
2. Capacity to contract - ability to make legally binding agreements.
3. Consideration - promisor must receive a legal benefit such as money.
4. Legal purpose
