Regulatory Compliance & Risk Management Flashcards

Under the NAIC Unfair Claims Settlement Practices Model Act, a violation is generally actionable by the regulator when the insurer commits it:

Answer: With such frequency as to indicate a general business practice

The model act targets violations committed flagrantly and in conscious disregard or with such frequency as to indicate a general business practice.

Which federal agency administers sanctions lists that claims departments must screen payees against before issuing payment?

Answer: Office of Foreign Assets Control

OFAC, part of the U.S. Treasury, maintains the Specially Designated Nationals list, and payments to listed parties are prohibited.

A liability insurer settles a bodily injury claim with a Medicare beneficiary. What federal requirement most directly applies?

Answer: Section 111 Mandatory Insurer Reporting under the Medicare Secondary Payer Act

Section 111 of the MMSEA requires liability, no-fault, and workers' compensation insurers to report settlements with Medicare beneficiaries to CMS.

An insurer agrees to cover a manufacturer's product liability exposure. From the manufacturer's perspective, this is which risk management technique?

Answer: Transfer

Buying insurance shifts the financial consequences of a loss to another party, which is risk transfer.

Most state fraud immunity statutes protect an insurer that reports suspected fraud to authorities from civil liability, provided the report is made:

Answer: Without malice, fraud, or bad faith

Immunity statutes generally shield good-faith reports, losing protection only where the insurer acted with actual malice or bad faith.

Which entity primarily conducts market conduct examinations of an insurer's claim handling practices?

Answer: State insurance departments

Insurance is regulated at the state level, and state insurance departments conduct market conduct exams, often coordinated through NAIC guidelines.

A claims department installs a second-level review for all payments over $50,000 to prevent improper payouts. This is best described as:

Answer: An internal control

Authority limits and secondary approvals are internal controls designed to prevent errors and fraud.