Degrees of Rate Regulation for other LOBs

patbaker12

I'm looking to add to my notes for how highly other lines not mentioned in the source or BattleActs are regulated. Would I be on the right track in assuming that:

• Other highly regulated lines would include: Med. Mal., flood, and disability
• Other medium regulation lines would include: APD, commercial property, renters, UBI, and umbrella
• Other low regulation lines would include: B&M, Products liability, warranty/long duration/guaranty, EPL, and D&O

graham

It's good to extend your thinking beyond what's been specifically asked before!

What were your reasons for putting these coverages in these categories? The reason I ask is that without having specific knowledge each type of insurance, you can often argue successfully for either low or high scrutiny. As far as the exam goes, I think if you show that you know the reasons for low scrutiny and the reasons for high scrutiny and relate them to the question in a half-way intelligent way then you would get credit.

But let's take a look at MEDICAL MALPRACTICE. I think you're right that this should be high scrutiny because:

• doctors (while sophisticated in their field) aren't necessarily sophisticated buyers of insurance
• there is obviously public and political interest around medical care
• we have credible data since there are many doctors and many procedures performed every day

Now, FLOOD insurance is handled largely by NFIP (National Flood Insurance Program) so almost by definition it's highly regulated since it's run by the government. If you look at the various reasons however for low & high scrutiny in the wiki, it's not quite so clear:

• Some buyers of flood insurance might be sophisticated (large commercial enterprises) and some are not (homeowners). So you may have to know which group of insureds are being considered to assess whether it should be low or high scrutiny,
• The credibility of the data might depend on the location. In a floodplain, there would be lots of data (a reason for high scrutiny), but if an average homeowner in a suburb somewhere wanted flood insurance, it's possible there's no data (a reason for low scrutiny).

For your low-scrutiny coverages, like B&M and D&O, I think you're probably right, especially D&O.

• D&O risks would be highly individualized. There also wouldn't be much relevant data and the buyers are very sophisticated.
• B&M is very common but it's a "boring" type of insurance. Politicians and the public don't lie awake at night thinking about it. If an A/C unit breaks down, it's inconvenient, but you just call the repair shop and get it fixed. It isn't going to break the bank like big medical bills. People and businesses are usually able to take care of it without too much trouble. We wouldn't gain much by having a regulatory body overseeing this.

About the risks you put in the middle: APD, renters, UBI, etc. They could probably be argued either way if they don't clearly fall into high or low scrutiny. APD would come under auto, but of course it's mainly liability that auto regulators are concerned with.

So, final takeaway is to learn the standard reasons for low and high scrutiny. Then you can mix & match them for the specific coverage you're asked in the exam question. And of course make sure you know the answers to past exam questions in case they repeat a question. And note that this is a relatively low-ranked syllabus reading. Keep that in mind when you're scheduling your review!

patbaker12

Very helpful, Graham!

amberxmc

Is UBI in current syllabus? for Spring 2024 sitting

Staff - AC

UBI is "usage-based insurance." Usually Auto.

graham

It is not on the syllabus any longer.