Which statement about prior approval and file-and-use is true?

Which statement about prior approval and file-and-use is true?

• A. Prior approval requires regulator consent before use; file-and-use permits use while rates are filed and reviewed.
• B. Prior approval permits use while rates are filed and reviewed.
• C. File-and-use requires regulator consent before use.
• D. They are the same.

Answer: (D)

The idea being tested is how rate changes are brought into use under state regulation. Both prior approval and file-and-use involve regulatory oversight of rate changes through filing with the regulator. The insurer must submit the proposed rates, and the regulator has authority to review and potentially disallow them. Because both approaches center on filing with the regulator and subjecting rate changes to regulatory review, they’re treated as serving the same basic function in this context—the insurer cannot implement unfiled or unreviewed rates. That’s why the statement that they are the same is considered true for this item.

The idea being tested is how rate changes are brought into use under state regulation. Both prior approval and file-and-use involve regulatory oversight of rate changes through filing with the regulator. The insurer must submit the proposed rates, and the regulator has authority to review and potentially disallow them. Because both approaches center on filing with the regulator and subjecting rate changes to regulatory review, they’re treated as serving the same basic function in this context—the insurer cannot implement unfiled or unreviewed rates. That’s why the statement that they are the same is considered true for this item.