State RegulationsPA specificDifficulty 2/5
Under Pennsylvania's rate regulation, which standard must a rate an insurer files for its policies satisfy?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
The rate statutes, 40 P.S. §§ 1181-1199 and 40 P.S. §§ 1221-1238, administered by the Pennsylvania Insurance Department, require filed rates to be neither excessive, inadequate, nor unfairly discriminatory. Excessive rates overcharge consumers, inadequate rates threaten the insurer's solvency, and unfairly discriminatory rates treat similarly situated insureds unequally. The three-part standard is the touchstone the department applies when reviewing rate filings.
Why the other options are wrong
- A) Rates need not be identical across competitors; competition among filed rates is expected, as long as each meets the statutory standard.
- B) No rate can guarantee freedom from loss; the law targets excess, inadequacy, and unfair discrimination, not profit assurance.
- D) Market leaders do not set rates for others; each insurer files its own rates for review by the Pennsylvania Insurance Department under 40 P.S. §§ 1181-1199.
Memory hook
Rate test: not too high, not too low, not unfairly unequal.