Which item is a requirement under Mandatory Corrective Action related to premiums?

• A. Document the adequacy of its premium rates
• B. Increase dividends
• C. Increase marketing spend
• D. Lower reserves

Answer: (A)

When a regulator focuses on premiums, the emphasis is on whether the pricing is sufficient to cover expected losses and expenses. In this context, the required action is to document the adequacy of premium rates. This means providing evidence, through actuarial analysis and rate filings, that current prices are adequate to support future claims, expenses, and margins, and to justify any needed rate changes as part of a corrective plan.

The other options don’t address premium pricing directly. Increasing dividends relates to capital distribution and isn’t a tool to fix rate adequacy. Increasing marketing spend is a business tactic that doesn’t establish or verify whether premiums are adequate. Lowering reserves affects financial safety margins rather than whether premium rates are sufficient to cover anticipated costs.