Definition and Meaning
Examination in the context of general insurance terms refers to an in-depth evaluation conducted by the state insurance department of an insurance company. This examination ensures that the company adheres to regulatory standards, maintains solvency, and operates in a manner that protects policyholders’ interests.
Etymology
The term examination originates from the Latin word “examinare,” which means to weigh or test out. Over time, the term evolved to represent a thorough investigation or evaluation.
Background
Examinations are a crucial aspect of the regulatory framework governing the insurance industry. They involve a comprehensive review of an insurance company’s financial statements, operational practices, and adherence to laws. State insurance departments conduct these evaluations to safeguard the interests of policyholders and ensure the overall stability of the insurance market.
Key Takeaways
- Purpose: Ensures regulatory compliance and financial stability.
- Conducted By: State insurance departments.
- Scope: Includes financial health, operational practices, and legal adherence.
- Outcome: Can result in recommendations for improvement, penalties, or other regulatory actions.
Differences and Similarities
- Examinations vs. Audits: Both involve thorough evaluation, but audits typically focus on financial accuracy and are often conducted by independent auditors. Examinations are broader in scope and focus on regulatory compliance.
- Routine vs. Targeted Examinations: Routine examinations are periodic and planned, while targeted examinations are prompted by specific concerns.
Synonyms
- Evaluation
- Review
- Inspection
- Assessment
Antonyms
- Omission
- Overlook
- Neglect
Related Terms with Definitions
- Regulatory Compliance: Adherence to laws, regulations, guidelines, and specifications relevant to business operations.
- Solvency: The ability of a company to meet its long-term financial obligations.
- Financial Statement: Records that outline the financial activities and condition of a business entity.
Frequently Asked Questions
What is the primary goal of an insurance examination?
The primary goal is to verify the compliance and financial health of the insurance company, ensuring it can meet its obligations to policyholders.
How often are insurance examinations conducted?
Examinations are usually conducted at intervals defined by state laws, often every three to five years. However, more frequent or targeted examinations can occur as necessary.
What happens if an insurance company fails an examination?
Failing an examination can lead to various consequences, including fines, stricter regulatory oversight, or in severe cases, revocation of the company’s license to operate.
Are the results of insurance examinations made public?
In most cases, the summary findings are publicized, though specific details may remain confidential unless regulatory action is taken.
Exciting Facts
- The first known insurance regulatory body was established in Massachusetts in the early 19th century.
- Examinations can sometimes take several months to complete, depending on the size and complexity of the insurance company.
Quotations from Notable Writers
“Inspect what you expect so you will not be surprised.” — Bryant H. McGill
Proverbs
“An ounce of prevention is worth a pound of cure.” This signifies the importance of regular examinations in preventing potential problems.
Humorous Sayings
“Insurance examinations—it’s like a dental check-up for your company!”
Related Government Regulations
- NAIC Model Laws, Regulations, and Guidelines
- State-specific Insurance Codes and Regulations
Suggested Literature and Other Sources for Further Studies
- “Insurance Regulation in the United States: An Overview for Business Lawyers” by Bradley L. Leonhard.
- National Association of Insurance Commissioners (NAIC) Regulatory Manuals.
- “Handbook of Insurance” edited by Georges Dionne.
Quizzes
Finis a constrained look into the world of insurance examination profound enough to make even the most stoic caretaker crack a smile — now go forth, regulated and assured!
Your scintillating guide,
Lydia Jenkins
October 4, 2023
