Georgia Navigator Practice Exam

How often does the Department review insurance companies for financial stability?

1. Every 3 years

2. Every 5 years

3. Every year

4. Every 10 years

The correct answer is: Every 5 years

The Department typically reviews insurance companies for financial stability every 5 years. This regular interval allows the Department to ensure that the insurance companies are maintaining adequate financial reserves and operating within sound financial practices, which are crucial for protecting policyholders. Such reviews assess the insurers' overall financial health, including their reserves and investment strategies, ensuring they can meet future claims and obligations to their customers. Conducting these reviews every 5 years strikes a balance; it is frequent enough to detect potential issues before they become serious, while still allowing insurance companies adequate time to stabilize and improve their financial practices during that period. A shorter review cycle, such as annually, could create excessive regulatory burden and hinder the companies' ability to operate effectively. Conversely, extending the review cycle beyond 5 years could increase the risk of financial instability going unnoticed for too long.