Read the text below entitled “Regulation Modernization” in order to answer questions 21 to 23:

Regulation Modernization
Source: www.iii.org (Adapted)Jan, 2010

    Insurance is regulated by the individual states. The move to modernize insurance regulation is being driven in part by the globalization of insurance services. Some large U.S. companies that operate in other countries support the concept of a federal system that provides one-stop regulatory approval while others believe the merits of a state system outweigh the virtues of a single national regulator. As a result of discussions about the merits of each system, states are making it easier for insurers to respond quickly to market forces.
    States monitor insurance company solvency. One important function related to this is overseeing rate changes. Rate making is the process of calculating a price to cover the future cost of insurance claims and expenses, including a margin for profit. To establish rates, insurers look at past trends and changes in the current environment that may affect potential losses in the future.
    Increasingly, even in the most regulated states, officials are relying on competition among insurance companies to keep rates down and are modernizing and streamlining the rate setting process.