Insurance Regulatory Frameworks & Compliance 2 — Questions and Answers
Question 1: Which federal act established minimum standards for health insurance portability and accountability, including protections for pre-existing conditions in group health plans?
- ACA
- HIPAA (Correct answer)
- ERISA
- COBRA
Correct answer: HIPAA
HIPAA (Health Insurance Portability and Accountability Act of 1996) established portability protections and limits on pre-existing condition exclusions in group health plans.
Question 2: Under the NAIC model law, what is the maximum number of days an insurer typically has to acknowledge receipt of a claim?
- 10 days (Correct answer)
- 15 days
- 20 days
- 30 days
Correct answer: 10 days
The NAIC Unfair Claims Settlement Practices Model Act requires insurers to acknowledge receipt of a claim within 10 working days.
Question 3: Which regulatory concept requires insurers to maintain sufficient assets to cover their liabilities and provide a cushion against unexpected losses?
- Rate adequacy
- Solvency margin (Correct answer)
- Loss ratio compliance
- Rate filing
Correct answer: Solvency margin
A solvency margin (or surplus) is the excess of assets over liabilities that regulators require to ensure insurers can pay all future claims.
Question 4: A state law that requires all admitted insurers to participate in a shared market for high-risk drivers unable to obtain standard coverage is called a(n):
- Assigned risk plan (Correct answer)
- Excess and surplus market
- Joint underwriting association
- Residual market pool
Correct answer: Assigned risk plan
An assigned risk plan (or automobile insurance plan) distributes high-risk drivers among all licensed auto insurers in proportion to their market share.
Question 5: The principle that insurance rates must not be unfairly discriminatory means that:
- All policyholders pay identical premiums
- Rates must reflect actual cost differences among risk classes (Correct answer)
- Insurers may not use credit scores in rating
- Rate differences between states are prohibited
Correct answer: Rates must reflect actual cost differences among risk classes
Non-discriminatory rates allow different premiums only when they reflect actuarially justified differences in expected losses or expenses among risk groups.
Question 6: Which document must an insurer file with the state insurance department before using a new policy form in most states?
- Surplus lines affidavit
- Certificate of authority
- Policy form filing (Correct answer)
- Certificate of compliance
Correct answer: Policy form filing
Most states require insurers to file policy forms with the insurance department for review or approval before they can be issued to consumers.
Question 7: Under state guaranty fund laws, when an admitted insurer becomes insolvent, covered policyholders are protected up to a maximum claim limit, which is typically:
- $100,000
- $300,000 (Correct answer)
- $500,000
- $1,000,000
Correct answer: $300,000
Most state property and casualty guaranty funds cover claims up to $300,000, though the exact limit varies by state and line of insurance.
Insurance Regulatory Frameworks & Compliance 2
Which federal act established minimum standards for health insurance portability and accountability, including protections for pre-existing conditions in group health plans?