Question

In: Operations Management

A common goal of insurance regulators is to ensure availability of property insurance to homeowners residing...

A common goal of insurance regulators is to ensure availability of property insurance to homeowners residing in urban areas. Concerned that insurers will offer property business only in upscale neighborhoods or urban areas, regulators in State A adopted a regulation requiring insurers to maintain a business presence throughout urban areas. State B adopted a regulation with the same goal as State A; however, State B’s regulation does not exempt any companies and includes a requirement that an executive from each company annually file a certification with the state. The certification must indicate how the company is complying with the regulation and provide evidence that the company is actively soliciting policies throughout the urban areas, with sales initiatives proportionate to population.

  1. Some of the ways in which insurers in State A responded to the regulation included recruitment of additional agents, targeted advertising and community sponsorship initiatives. Name the type of regulation that best describes the approach taken by state A and explain why the actions taken by insurers in State A are consistent with that regulatory approach. ("Principles-based regulations", "Rules-based regulations", "Risk-based regulations" , and "Evidence-based regulations" are the regulations to choose from)
  1. Suppose State A proposes and adopts a change to the regulation to exempt smaller companies and niche writers from compliance with the regulation. Name the type of regulation that best describe State A’s approach following this change and explain why this change would not necessarily undermine the goal of State A’s regulation. ("Principles-based regulations", "Rules-based regulations", "Risk-based regulations" , and "Evidence-based regulations" are the regulations to choose from)
  1. Name the type of regulation that best describes the approach taken by State B and explain how it differs from the approach taken by State A. ("Principles-based regulations", "Rules-based regulations", "Risk-based regulations" , and "Evidence-based regulations" are the regulations to choose from)

Solutions

Expert Solution

a. The type of enactment that better characterizes the system embraced by State An is Product guideline and Market lead rules. The methodology taken by express An is reliable in light of the fact that State A controlled the item to be disseminated all through the state. Likewise, State A referenced that the item must be available in scantily populated territories just as not all that created zones. It ensures that the measures are taken by express A safety net provider is in accordance with the administrative methodology.

b. Money related Reporting and capital prerequisites are the structures that will be trailed by the state on the off chance that the State chooses to exclude littler organizations from consistence with the guideline. Any business should gain cash. Along these lines, it probably won't be workable for littler players to be available the whole way across topography. Accordingly guaranteeing reasonable rivalry and preventing the syndication from greater players.

c. Money related detailing by back up plans, Financial assessment, and Market lead rules is the methodology taken by State B. It contrasts from express A by the less severity of working together. While the business may show some bogus activities and those paper-based activities probably won't transform into real outcomes when contrasted with the stringent consistence standards of express A.


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