Regulation of Insurance Products (APIR) exam 2024
with correct answers
Regulatory Review - ANSWER Regulatory review of filings is very important for
consumer protection.
State Regulation - ANSWER -Comply with state laws
-Rates are adequate, and not excessive or discriminatory
Adequate Rates - ANSWER Are sufficient to determine a normal anticipated loss
and company expenses.
Excessive Rates - ANSWER Make it hard on consumers and allows insurance
companies to make an unreasonably large profit.
Purpose for Filing Review Process - ANSWER Ensures protection for the public
(Consumers) and the insurance companies making filings (filers).
Regulators must review forms to ensure they contain the necessary elements.
Some states also include a review of advertising material.
Benefit to Insurers - ANSWER State Contract Review Analyst:
-Assures compliance with state law(s).
-Provides quality assurance.
-Assures contract is acceptable for intended audience.
Policy Forms include: - ANSWER -Policies
-Certificates
-Applications
-Riders
-Declarations
-Amendments
-Endorsements
-Advertising Material
-Notices
-Disclosures
-Actuarial Memorandum
The US Insurance Market - ANSWER -Has approximately 6,300 domestic
insurance companies
-Manages assets of $7 trillion
-Employs two million people
-$1.7 trillion in premiums in 2011 - 11% of Gross Domestic Product (GDP)
Insurance Functions - ANSWER -Product Design
-Pricing
,-Distribution
-Underwriting
-Claim Settlement
-Investment
-Reinsurance
Product Design - ANSWER -Specific requirements for state(s) that insurer is writing
policy in.
-What can and cannot be done in the policy.
-Insurers need to know requirements, so they can customize products.
Pricing - ANSWER Actuaries assist in establishing rate or premium based on:
-Profitability theories
-Law of large numbers
-Loss cost for P&C
Distribution - ANSWER Distribution Channels:
1. Captive (Exclusive) Producers/Agents
-Employees of Insurer
-Under contract to sell for only one insurer
2. Independent Producers
-Represents/sells for many insurers
3. Brokers (Most often used for commercial policies)
-Represent clients buying insurance
Direct Writing Marketing:
-Telephone solicitation
-Mail
-Internet
Underwriting - ANSWER The selection process used by the insurer to determine
what products or business to write. (The insurer follows a set of underwriting
guidelines)
Claim Settlement - ANSWER The claimant (insured) notifies the insurer that they
suffered a loss (claim).
The claim is settled when it is either denied or paid.
A claim can be settled with or without legal action being taken.
Investment - ANSWER "Certificate of Authority" given to insurer when they
adequately satisfy the Reserve in case of a loss payment.
Reserves can be invested, but restrictions may apply.
Reinsurance - ANSWER "Insurance for Insurers" To help spread the risk.
Is the maximization of the principle of insurance.
,Competition - ANSWER -One company or a select few do not dominate the market.
-Policy contracts are difficult to understand, so premiums dictate most of public
perception of competition.
-Cyclical in nature:
+Stronger economy tends to lower premiums
+History of recent catastrophes tends to raise
premiums.
Stable Market - ANSWER -Fewer insolvencies means a more competitive and
stable market.
-Regulatory efforts are constantly monitoring to protect consumers' interests.
Consumers - ANSWER -People don't usually read or fully understand their
insurance policies. (Ex: Not knowing that some exclusions may exist in their policy)
-People generally don't understand how insurance is priced.
Product Filing Review Handbook Goal - ANSWER Maintain a Speed to Market for
insurers while also maintaining high levels of consumer protections.
Product Filing Review Handbook - ANSWER - For Uniformity of regulatory
processes while addressing state-specific needs of consumers.
-One source for Speed to Market tools and their instructions.
-Training tool for new product filing reviewers.
Product Filing Review Handbook Information - ANSWER Basic Information about
the filing and review of:
-Rate,
-Rule, and
-Form filings,
for all lines of insurance.
SERFF - ANSWER Allows insurers, advisory organizations, and third-party filers to
submit insurance product filings electronically to state insurance regulators.
(Providing flexibility, promoting uniformity)
Insurance Product required by law in most states. - ANSWER Auto Insurance
Certificate of Authority - ANSWER An insurer must obtain this in order to write
business in a state.
Advisory Organizations - ANSWER Are entities authorized under state laws to
make insurance filings on behalf of their members and subscribers.
-Are not permitted to mandate that certain rates are used.
Prohibited Activity:
+Publish developed rates
Permitted Activities:
, +Develop Loss Costs
+Develop Policy Forms
+Create Rating Classifications
+Conduct Inspections
+Manage Residual Markets
+Building Inspections
If a filer fails to supply any missing or correct deficient information, what happens to
the filing? - ANSWER It is denied, or not approved.
Advertising Material - ANSWER Is not typically included in a rate filing for an
insurance product.
Filing Reviewer - ANSWER Is directly responsible for making sure that the policy
coverage in the filing comply with all state laws.
Rate Filing Includes - ANSWER -Actuarial documentation for submitted rates
-Rating formulas
-Territorial Segmentation Information
-Rate Charts
-Profit Percentages
-Expected Loss Percentages
Title Insurance - ANSWER Is a coverage that is required by lenders in most states.
Reinsurers - ANSWER Is the insurance company that provides insurance to
another company. The reinsurer is the assuming company.
Workers' Compensations Insurance - ANSWER Each state legislature establishes
the benefits for Workers' Compensation insurance.
Why is reinsurance necessary? - ANSWER For Catastrophic events.
No-fault Auto Insurance - ANSWER Limits your right to sue.
Frequency of a Claim Incidence - ANSWER Number of Claims divided by the
number of exposers
Competitive Rating Laws - ANSWER File and Use
Use and File
Regulations vs. Laws - ANSWER Regulations are more detailed and specific than
laws.
RBC (risk-based capital) - ANSWER Establishes a hypothetical minimum capital
level that is compared to a company's actual capital level.
Deemer Provision - ANSWER a law stating that if an insurance regulator does not
act on an insurers filing within a specified time, the filing is deemed approved
with correct answers
Regulatory Review - ANSWER Regulatory review of filings is very important for
consumer protection.
State Regulation - ANSWER -Comply with state laws
-Rates are adequate, and not excessive or discriminatory
Adequate Rates - ANSWER Are sufficient to determine a normal anticipated loss
and company expenses.
Excessive Rates - ANSWER Make it hard on consumers and allows insurance
companies to make an unreasonably large profit.
Purpose for Filing Review Process - ANSWER Ensures protection for the public
(Consumers) and the insurance companies making filings (filers).
Regulators must review forms to ensure they contain the necessary elements.
Some states also include a review of advertising material.
Benefit to Insurers - ANSWER State Contract Review Analyst:
-Assures compliance with state law(s).
-Provides quality assurance.
-Assures contract is acceptable for intended audience.
Policy Forms include: - ANSWER -Policies
-Certificates
-Applications
-Riders
-Declarations
-Amendments
-Endorsements
-Advertising Material
-Notices
-Disclosures
-Actuarial Memorandum
The US Insurance Market - ANSWER -Has approximately 6,300 domestic
insurance companies
-Manages assets of $7 trillion
-Employs two million people
-$1.7 trillion in premiums in 2011 - 11% of Gross Domestic Product (GDP)
Insurance Functions - ANSWER -Product Design
-Pricing
,-Distribution
-Underwriting
-Claim Settlement
-Investment
-Reinsurance
Product Design - ANSWER -Specific requirements for state(s) that insurer is writing
policy in.
-What can and cannot be done in the policy.
-Insurers need to know requirements, so they can customize products.
Pricing - ANSWER Actuaries assist in establishing rate or premium based on:
-Profitability theories
-Law of large numbers
-Loss cost for P&C
Distribution - ANSWER Distribution Channels:
1. Captive (Exclusive) Producers/Agents
-Employees of Insurer
-Under contract to sell for only one insurer
2. Independent Producers
-Represents/sells for many insurers
3. Brokers (Most often used for commercial policies)
-Represent clients buying insurance
Direct Writing Marketing:
-Telephone solicitation
-Internet
Underwriting - ANSWER The selection process used by the insurer to determine
what products or business to write. (The insurer follows a set of underwriting
guidelines)
Claim Settlement - ANSWER The claimant (insured) notifies the insurer that they
suffered a loss (claim).
The claim is settled when it is either denied or paid.
A claim can be settled with or without legal action being taken.
Investment - ANSWER "Certificate of Authority" given to insurer when they
adequately satisfy the Reserve in case of a loss payment.
Reserves can be invested, but restrictions may apply.
Reinsurance - ANSWER "Insurance for Insurers" To help spread the risk.
Is the maximization of the principle of insurance.
,Competition - ANSWER -One company or a select few do not dominate the market.
-Policy contracts are difficult to understand, so premiums dictate most of public
perception of competition.
-Cyclical in nature:
+Stronger economy tends to lower premiums
+History of recent catastrophes tends to raise
premiums.
Stable Market - ANSWER -Fewer insolvencies means a more competitive and
stable market.
-Regulatory efforts are constantly monitoring to protect consumers' interests.
Consumers - ANSWER -People don't usually read or fully understand their
insurance policies. (Ex: Not knowing that some exclusions may exist in their policy)
-People generally don't understand how insurance is priced.
Product Filing Review Handbook Goal - ANSWER Maintain a Speed to Market for
insurers while also maintaining high levels of consumer protections.
Product Filing Review Handbook - ANSWER - For Uniformity of regulatory
processes while addressing state-specific needs of consumers.
-One source for Speed to Market tools and their instructions.
-Training tool for new product filing reviewers.
Product Filing Review Handbook Information - ANSWER Basic Information about
the filing and review of:
-Rate,
-Rule, and
-Form filings,
for all lines of insurance.
SERFF - ANSWER Allows insurers, advisory organizations, and third-party filers to
submit insurance product filings electronically to state insurance regulators.
(Providing flexibility, promoting uniformity)
Insurance Product required by law in most states. - ANSWER Auto Insurance
Certificate of Authority - ANSWER An insurer must obtain this in order to write
business in a state.
Advisory Organizations - ANSWER Are entities authorized under state laws to
make insurance filings on behalf of their members and subscribers.
-Are not permitted to mandate that certain rates are used.
Prohibited Activity:
+Publish developed rates
Permitted Activities:
, +Develop Loss Costs
+Develop Policy Forms
+Create Rating Classifications
+Conduct Inspections
+Manage Residual Markets
+Building Inspections
If a filer fails to supply any missing or correct deficient information, what happens to
the filing? - ANSWER It is denied, or not approved.
Advertising Material - ANSWER Is not typically included in a rate filing for an
insurance product.
Filing Reviewer - ANSWER Is directly responsible for making sure that the policy
coverage in the filing comply with all state laws.
Rate Filing Includes - ANSWER -Actuarial documentation for submitted rates
-Rating formulas
-Territorial Segmentation Information
-Rate Charts
-Profit Percentages
-Expected Loss Percentages
Title Insurance - ANSWER Is a coverage that is required by lenders in most states.
Reinsurers - ANSWER Is the insurance company that provides insurance to
another company. The reinsurer is the assuming company.
Workers' Compensations Insurance - ANSWER Each state legislature establishes
the benefits for Workers' Compensation insurance.
Why is reinsurance necessary? - ANSWER For Catastrophic events.
No-fault Auto Insurance - ANSWER Limits your right to sue.
Frequency of a Claim Incidence - ANSWER Number of Claims divided by the
number of exposers
Competitive Rating Laws - ANSWER File and Use
Use and File
Regulations vs. Laws - ANSWER Regulations are more detailed and specific than
laws.
RBC (risk-based capital) - ANSWER Establishes a hypothetical minimum capital
level that is compared to a company's actual capital level.
Deemer Provision - ANSWER a law stating that if an insurance regulator does not
act on an insurers filing within a specified time, the filing is deemed approved
