Regulatory Compliance & Risk Management Flashcards

State fair claims practices regulations commonly require an insurer to acknowledge receipt of a claim within a set period. The most common timeframe in many states is:

Answer: 15 days

Many states, following NAIC model regulation language, require acknowledgment within about 15 days, though exact deadlines vary by state.

A manufacturer stops producing a product line because its liability exposure is too high. This is an example of:

Answer: Risk avoidance

Eliminating the activity that creates the exposure is avoidance.

A health-related claim file contains protected health information. Which federal law sets privacy standards for such information when held by covered entities?

Answer: HIPAA

HIPAA's Privacy Rule governs protected health information held by covered entities and their business associates.

An insurer's claim manual says to settle every claim regardless of merit to avoid complaints. From a regulatory and risk perspective, the biggest concern is:

Answer: It may cause improper payments, encourage fraud, and fail reserve and solvency standards

Paying claims without merit wastes policyholder funds and invites fraud, which conflicts with sound claim practices and solvency oversight.

The McCarran-Ferguson Act of 1945 is significant to claims regulation because it:

Answer: Affirmed that states have primary authority to regulate insurance

McCarran-Ferguson left insurance regulation mainly to the states and limited federal antitrust law where states regulate.

Which practice best helps a claims department show compliance during a market conduct exam?

Answer: Keeping complete, dated file documentation of every contact, decision, and payment

Examiners rely on file documentation to verify timely, fair handling, so thorough and dated notes are essential.

A company decides to pay small property losses out of its operating budget rather than insure them. This technique is:

Answer: Retention

Retention means the organization keeps and funds its own losses, usually for predictable, low-severity exposures.