Question

Under _________ rate regulation, an insurer can have to wait to use a new rate until the insurance department allows it.

A) Prior approval
B) File-and-use
C) Use-and-file
D) Open competition

Answer 1

Under Prior approval rate regulation, an insurer must wait for the insurance department's approval before using a new rate. This system is distinct from file-and-use, use-and-file, and open competition systems.

Step-by-step explanation:

The regulation you are referring to is Prior approval rate regulation. Under the prior approval system, an insurer must first obtain approval from the insurance department before they can begin using a new rate. This contrasts with other systems such as file-and-use, where insurers can implement a new rate immediately after filing it with regulators, or use-and-file, where insurers can use a new rate immediately and file it with regulators shortly thereafter. In an open competition system, typically no filing with the state insurance department is required prior to using new rates.