2/20 Flashcards
A(n) ___ is a corporation owned by stockholders whose objective is to earn a profit for the stockholders by increasing the value of stock and paying dividends.
Stock insurer
A(n) ___ is a corporation owned by the policy owners.
Mutual insurer
A(n) ___ is owned by the policy owners, has no stockholders, and the insurer doesn’t issue assessable policies.
Advance Premium Mutual
A(n) ___ is a mutual insurer that has the right to assess the policyowners an additional amount if the insurer’s financial operations are unfavorable.
Assesssment Mutual
A(n) ___ is a mutual insurer that provides life and health insurance to members of a social/religious organization.
Fraternal Mutual
___ is not an insurer, but a society of members who underwrite insurance in syndicates. The memberships include corporations, individual members (called Names), and limited partnerships. The members must meet stringent financial requirements.
Lloyd’s of London
A(n) ___ is an unincorporated organization in which insurance is exchanged among members called subscribers.
Reciprocal Exchange
___ are generally organized as nonprofit, community oriented plans. ___ plans provide coverage for hospital services, and ___ plans provide coverage for physicians’ and surgeons’ fees.
Blue Cross and Blue Shield Plans; Blue Cross; Blue Shield
A(n) ___ is a private insurer that provides comprehensive health care services to its members. Broad health care services are provided for a fixed prepaid fee, cost control is emphasized, and the choice of health care providers may be restricted.
Health Maintenance Organization (HMO)
A(n) ___ is an insurer owned by a parent firm for purposes of insuring the parent firm’s loss exposures.
Captive Insurer
___ refers to life insurance that is sold by mutual savings banks over the phone or through a website.
Savings Bank Life Insurance
A(n) ___ is someone who legally represents the principal and has the authority to act on the principal’s behalf.
Agent
The principal is legally responsible for all acts of an agent when…
The agent is acting within the scope of authority that may be expressed, implied, or apparent.
A(n) ___ provides temporary insurance until a policy is written.
Binder
A broker is someone who legally represents the insured, and:
(3 points)
- Solicits applications and attempts to place coverage with an appropriate insurer
- Is paid commission from the insurers where business is placed
- Does not have the authority to bind the insurer
A(n) ___ is licensed to place business with a nonadmitted insurer.
Surplus Lines Broker
Surplus lines refer to any type of insurance for which there is no available market within the state, and coverage must be placed with a ___.
Nonadmitted insurer
The ___ is a business firm that usually represents several unrelated insurers.
Independent Agency
Under the ___, an agent represents only one insurer or group of insurers under common ownership.
Exclusive agency system
A(n) ___ is an insurer in which the salesperson is an employee of the insurer, not an independent contractor.
Direct Writer
A(n) ___ insurer sells directly to the consumer by TV/media.
Direct Response
Products are sold through ___, employees who receive a salary and incentive payments based on sales.
Group Representatives
___ refers to the pricing of insurance and the calculation of insurance premiums.
Ratemaking
A(n) ___ is the price per unit of insurance.
Rate
A(n) ___ is the unit of measurement used in insurance pricing.
Exposure unit
Rates and premiums are determined by a(n) ___, using the company’s past loss experience and industry statistics.
Actuary
The ___ is the portion of the rate needed to pay losses and loss adjustment expenses.
Pure Premium
___ is the amount that must be added to the pure premium for other expenses, profit, and a margin for contingencies.
Loading
The ___ consists of the pure premium and a loading element.
Gross rate
The ___ paid by the insurer consists of the gross rate multiplied by the number of exposure units.
Gross premium
How is the gross rate calculated?
Pure premium / (1 - expense ratio)
___ refers to the process of selecting, classifying, and pricing applicants for insurance.
Underwriting
The corporate structure of mutual insurers is changing due to…
(3 points)
- Increase in company mergers
- Demutualization, whereby a mutal company is converted into a stock insurer
- Creation of mutual holding companies
___ is where a mutual company is converted into a stock insurer.
Demutualization
A(n) ___ is a company that directly or indirectly controls an authorized insurer.
Holding company
The underwriting policy is stated in an underwriting guide, which specifies:
(5 points)
- Acceptable, borderline, and prohibited classes of business
- Amounts of insurance that can be written
- Territories to be developed
- Forms and rating plans to be used
- Business that requires approval by a senior underwriter
Name the three basic principles of underwriting.
- Attain an underwriting profit
- Select prospective insureds according to the company’s underwriting standards
- Provide equity among policyholders
