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1
Q

Sharing the losses of a few people amongst the many

A

Insurance

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2
Q

The chance of loss

A

Risk

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3
Q

Type of risk that offers the chance for loss or profit

A

Speculative Risk

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4
Q

Type of risk that can only offer loss, not gain

A

Pure risk

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5
Q

True or false: insurance is pure risk

A

True

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6
Q

An event that may cause a loss

A

Peril

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7
Q

2 Elements of an insurance contract

A
  1. Must be a future event
  2. The future event must be fortuitous (accidental)
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8
Q

Anything of value received to bind a contract

A

Consideration

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9
Q

2 Types of Loss

A
  1. Direct Loss
  2. Indirect Loss
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10
Q

3 Categories of Risk

A
  1. Personal Risk -bodily injury, loss of life or income
  2. Property Risk - damage to property
  3. Liability Risk - loss or damage to a third party
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11
Q

A contract, expressed or implied, to repay in the event of a loss.

A

Indemnity

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12
Q

3 Parties to an Insurance Contract

A
  1. First party: the insured
    Purchases insurance, wants protection, client
  2. Second party: the insurer
    Insurance Company
  3. Third party: anyone who claims against the insured’s policy
    Liability; person injured by you
    Not involved in setting up a policy, only in claim
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13
Q

Replacement Cost – Depreciation

A

Actual Cash Value

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14
Q

The share of the premium allowed to the brokerage/broker/agent for having produced the business

A

Commission

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14
Q

The current cost of replacing an article with a similar one of the same condition, taking into account factors that may augment or lower value

A

Actual Cash Value

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15
Q

The amount the insured must pay

A

Policy premium

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16
Q

The portion of the premium the brokerage/broker/agent has to submit to the insurer

A

Net Premium

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17
Q

What does IBC stand for

A

Insurance Bureau of Canada

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18
Q

Advocates and promotes industry positions and a better understanding of the insurance business

A

Insurance Bureau of Canada

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19
Q

Provides a forum to identify issues and develop policy

A

Insurance Bureau of Canada

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20
Q

Studies legislation and legislative proposals that effect insurance companies and stays on top of issues

A

Insurance Bureau of Canada

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21
Q

the capacity to confirm to people who have submitted insurance applications that they have coverage

A

binding authority

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22
Q

gives agents and brokers the power to make decisions that enter insurers into contracts of insurance.

A

binding authority

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23
Q

A notice and confirmation to the insurer that it has been bound to a contract of insurance

A

Cover Note

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24
Q

A written or oral agreement given to the insured which confirms that insurance coverage is in effect.

A

Binder

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25
Q

The physical link between insurers and consumers. They have specialized knowledge

A

Intermediaries

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26
Q

Types of Intermediaries

A
  1. Brokers
  2. Agents
  3. Adjusters
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27
Q

Licensed independent business person who places business with any number of insurers for the insured

A

Broker

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28
Q

An intermediary that represents only one insurance company or only sells life insurance

A

Agent

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29
Q

Intermediaries between the insurance company and customers who deal with claims settlement.

A

Adjusters

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30
Q

True or False: Adjusters are not employed by any one insurance company

A

True

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31
Q

Broker/Agent account where premiums are collected and deposited; cant touch apart from insurers being paid for policies issued

A

Trust account

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32
Q

Broker/Agent general business account from which operating expenses are withdrawn and commissions deposited

A

Operating account

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33
Q

Quebec term for contract

A

Mandate

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34
Q

Quebec term for Principal

A

Mandator

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35
Q

Quebec term for Agent

A

Mandatory

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36
Q

Our contract with the insurer for selling and servicing on their behalf

A

Principal-Agent Contact

37
Q

3 Parties to the Principal-Agent Contract

A

1st party: Principal (insurer)
2nd party: Intermediary (agent/broker)
3rd party: Insured

38
Q

This refers to how the loss paid out to claims should not be greater than the premiums taken in

A

Loss ratio

39
Q

What is it called when insurance companies are making money off the premium collected

A

Underwriting gains

40
Q

The amount of money an insurance company charges to provide coverage for a specific item or policy

41
Q

The price of a unit of insurance for one year

42
Q

The process of establishing rates for each class of insurance. It is determining the cost of a specified unit of insurance for a given time.

A

Ratemaking

43
Q

An organization that employs independent business people who operate with one or more insurance companies in order to place business.

44
Q

3 Classes of Insurance Risk

A
  1. Personal lines (stuff)
  2. Commercial lines (businesses)
  3. Special risks (large industrial stuff, amusement parks)
45
Q

Assuming risk by setting aside a pool of money to use for compensation in case something happens

A

Self-insurance

46
Q

3 ways of dealing with risks

A

E – Eliminate or reduce risk
A – Assume or retain risk
T – Transfer risk

47
Q

Past claims dictate future claims

A

The Principle of Probability

48
Q

It states that a bigger sample size decreases uncertainty.

A

The Law of Large Numbers

49
Q

Three types of basic fire and EC policy:

A
  1. Standard policy (aka Named Perils form)
  2. Broad policy
  3. Comprehensive policy (aka All Risk)
50
Q

Type of basic fire and EC policy that covers the listed perils, and both building and contents are covered

A

Standard policy (aka Named Perils form)

51
Q

Type of basic fire and EC policy that covers the contents of the building for what’s named and
All Risk on the building itself

A

Broad policy

52
Q

Type of basic fire and EC policy that lists only the perils you aren’t covered for.

A

Comprehensive policy

53
Q

Basic Fire Coverage includes what coverages?

A

Fire
Lightning
Explosion (limited – only coal, natural gas, and manufactured gas)

54
Q

What are included in the Basic Fire and Extended Coverage Perils

A

Windstorm and hail
Water escape/rupture/freezing
Falling object
Lightning
Impact by aircraft or land vehicle
Vandalism and malicious acts
Explosion
Riot
Smoke
Fire
(LIVerSWwF)

55
Q

A condition that may cause a loss to occur or make the loss more severe

56
Q

2 Types of Hazard

A
  1. Moral
  2. Physical
57
Q

A hazard that relates to condition or pertains to property

A

Physical hazard

58
Q

A hazard that relates to the human element, Attitudes and behaviours, character

A

Moral Hazard

59
Q

A material fact can change one of these three things:

A
  1. The acceptability of risk
  2. The amount of premium to be charged
  3. The conditions applicable to accepting risk (that is, the type of coverage offered)
60
Q

It would affect a contract of insurance enough to influence an insurer’s decision on whether to accept the risk.

A

Material Fact

61
Q

Incorrect or missing information.

A

Misrepresentation

62
Q

Intentionally withholding information

A

Concealment

63
Q

It could be innocent or intentional, but it counts as concealment because of a lack of doing due diligence on what was required to be known.

A

Non-disclosure

64
Q

A legal principle calling for the highest standards of integrity on the part of the insured and the insurer.

A

Utmost good faith

65
Q

What are the 6 functions of insurance? (SALSAS)

A
  1. Spread of risk
    1. Aid to security
    2. Loss prevention activities
    3. Source of Capital
    4. Aid to credit
  2. Source of employment
66
Q

3 Considerations to achieve spread of risk

A
  1. Volume – insure a large number of risks
  2. Diversity of type of risk – insure as many different kinds of risk as possible
  3. Diversity of location – insure as many different locations as practicable
67
Q

The premium required to meet losses that occur

A

Pure premium

68
Q

An extra commission paid annually to a broker or an agent if the business placed by the broker or agent produced a certain level of profitability for the insurer.

A

Contingent Commission aka Profit Commission

69
Q

A relationship based on trust and good faith and requires that the agent/broker acts in the best interest of the customer.

A

Fiduciary duty

70
Q

The responsibilities of Agents and Brokers are to:

A
  1. Act within the terms of their contract
  2. Follow instructions as to types of businesses that may be written
  3. Collect premiums and hold them in trust
  4. Remit premiums
  5. Advise the insurer of business written promptly

6.Advise the insurer promptly of all claims notified

71
Q

True or false: The regulation of all insurance intermediaries falls under provincial jurisdiction.

72
Q

Who is the regulator of Insurance in Ontario?

73
Q

What does RIBO stand for?

A

Registered Insurance Brokers of Ontario

74
Q

How are intermediaries regulated? (QLOR)
(5-10)

A

Qualification
Licensing
Operating requirements
Renewal of license

75
Q

Large companies appoint independent brokers to be their sales force and bring clients to them. They pay commission for policies issued
The client list belongs to the broker, not the insurer.

(5-4)

A

Independent brokerage system

76
Q

They market their policies through exclusive agents who represent only one company.

(5-4)

A

Exclusive Agency Companies

77
Q

The expressed will of society governing relationships among members of that society.

78
Q

The two basic systems of law

A
  1. Civil Code (Quebec)
  2. Common Law (everywhere else)
79
Q

True or false: Common law is more restrictive because civil code has more room for interpretation

80
Q

The 2 classes of Law

A
  1. Criminal law (murder, burglary)
  2. Civil law / Private law (lawsuits and losses)
81
Q

True or false: Insurance is concerned with civil law

82
Q

This is also known as a legal wrong

83
Q

The danger of a loss, particularly fire, arising from what happens to another risk close by.

84
Q

The sum total of values which, if damaged or destroyed, would cause loss under a policy – the value of everything a policy insures.

85
Q

The words or paragraphs in a policy or endorsement which describe some specific coverage or limitation or modification

86
Q

States that the client is responsible for paying the deductible, whether or not they are at fault.

A

Deductible clause

87
Q

Agreed specified amount that the insured must pay on a claim benefit before the insurance company will cover the rest of the claim.

A

Deductible

88
Q

The amount of loss that the insured is responsible for.

A

Deductible

89
Q

This clause states that somebody other than the insured has a financial interest in the property insured.

A

Loss Payable Clause

RIBO (6 decks)

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