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Property & Casulaty > 2 - General insurance > Flashcards

2 - General insurance Flashcards

1
Q

Insurance is a social device for

A

Spreading the chance of financial loss among a large number of people

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2
Q

Policy

A

A contract of insurance

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3
Q

Loss

A

Reduction in the value of an asset

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4
Q

Risk

A

Possibility that a loss might occur

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5
Q

Speculative Risk

A

Creates a risk situation and offers the opportunity for gain (gambling).

Insurance will NOT cover these risks.

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6
Q

Pure Risk

A

Only possibility for loss to occur.

Insurance does accept this risk.

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7
Q

What is the purpose of insurance?

A

To restore the insured to their original position

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8
Q

Hazard

A

Something that increases the risk

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9
Q

Physical Hazard
(Example)

A

Dead tree next to house that can blow over onto house

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10
Q

Moral Hazard
(Example)

A

Dishonest client who damaged their own property

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11
Q

Morale Hazard
(Example)

A

Careless person who has no pride of ownership in their property

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12
Q

Peril

A

Cause of loss

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13
Q

Loss

A

Reduction in the value of the insured’s property caused by an insured peril

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14
Q

Risk Managers

A

Evaluate risks for loss frequency, severity and potential dollar losses over time

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15
Q

Exposure

A

Something that could result in a loss

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16
Q

How to manage risks

A

A risk may be retained, avoided, reduced or transferred

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17
Q

Insurable Interest

A

A legitimate interest in the preservation of the life or property insured

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18
Q

How is economic loss measured?

A

By lost wages or by actual medical expenses incurred

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19
Q

Catastrophic Perils
(Example)

A

War, nuclear risk and earthquakes

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20
Q

Restoration

A

To restore, in whole or in part, to the condition prior to the loss in the form of payment, repair or replacement

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21
Q

What are the three major sources of insurance?

A

Private commercial insurers (profit)
Private non commercial insurers (nonprofit)
US Government

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22
Q

Stock Insurers

A

Consists of stockholders who own shares in the company.

Stockholder provides capital for insurer and insurer shares profit.

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23
Q

Mutual insurers

A

Ownership rests with the policyholders.

Votes for director board

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24
Q

Reciprocal insurers

A

Unincorporated groups of people providing insurance for one another through individual indemnity agreements.

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25
Q

Fraternal insurers

A

Primarily life insurance carriers that exist as social organizations and usually engage in charitable activities.

(Members of a lodge or fraternal organization)

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26
Q

Reinsurance

A

A form of insurance between insurers that occurs when an insurer (the reinsurer) agrees to accepts all or a portion of a risk coveted by another insurer

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27
Q

Excess of loss basis

A

The reinsurer will pay only the portion of loss that exceeds a threshold

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28
Q

Quota share basis

A

The insurers will share loss in a pro rats or fixed percentage basis

29
Q

Facultative basis

A

The insurer elects to reinsure certain risks but not others

30
Q

Captive insurers

A

Formed to serve the insurance needs of their stockholders

31
Q

Surplus Lines

A

For a large risk it unusual risk to be placed through a surplus lines broker to place it with an unauthorized carrier in another state or country

32
Q

Lloyds Association

A

An unincorporated group of individuals who band together to assume risks in the area of surplus lines.

33
Q

Government Insurers

A

Provides life and health insurance

34
Q

What types of insurances does the FEDERAL Government offer?

A

War Risk Insurance
Nuclear Energy Liability Insurance
National Flood Insurance
Federal Crime Insurance
Federal Crop Insurance
Mortgage Loan Insurance

35
Q

What plans does the government provide at STATE level?

A

Unemployment insurance
Workers Compensation
Second injury funds
State ran medical insurance

36
Q

Domestic insurer

A

Insurer that is incorporated under the laws of the state in which it conducts business

37
Q

Foreign insurer

A

Insurer that conducts business in a state where it is NOT a resident

38
Q

Alien insurer

A

Insurer that is incorporated in a country other than the US

39
Q

Financial rating service

A

They rate insurance companies according to the amount of financial reserves that the company has available to pay future claims and other liabilities

40
Q

Independent insurance producers

A

Sell the insurance products of several companies and work for themselves or other producers

41
Q

Exclusive or Captive producers

A

Represent only one company

42
Q

Vending machine sales

A

Consist of travel accident policies sold at airport counters

Usually only good for that trip and usually only covers accidental death

43
Q

Broker

A

An independent salesperson who selects for their client insurance coverage from whatever company best fills the clients needs.

44
Q

Producer

A

An authorized person to act on behalf of another person

45
Q

What are the three types of authority?

A

Express
Apparent
Implied

46
Q

Express Authority

A

An explicit, definite agreement.
The authority the principal gives the producer as set forth in the contract

47
Q

Implied authority

A

Not expressly granted but it actual authority that the producer has to transact the principles business in accordance with general business practices.

48
Q

Apparent authority

A

Authority a producer SEEMS to have because of certain actions taken on their part.

49
Q

Fiduciary duty

A

A relationship developed when a person relies on another persons action or advice

50
Q

Error and Omissions insurance

A

Needed by professionals who give advice to cover negligence, error or omission by the insurer

51
Q

COAL contract

A

Consideration
Offer
Acceptance of the offer
Legal purpose

52
Q

Consideration

A

Exchange of value - the client pays the premium and the insurance company provides coverage.
Doesn’t have to be equal

53
Q

Offer

A

Client when they complete and sign the application and pays for first premium

54
Q

Acceptance of the offer

A

When the underwriter approves the application and issued the policy for delivery

55
Q

Legal purpose

A

Illegal contracts are unenforceable in court. All parties must be competent- of age, sound mind and not under the influence

56
Q

Doctrine of adhesion

A

If the insurance contract language is vague or unclear, any ambiguity in I’ll be construed in favor of the insured

57
Q

Waiver

A

Voluntary giving up of a known right

58
Q

Concealment

A

Deliberate omission of a material fact.

59
Q

Fraud

A

Deliberate attempt to deceive the producer or insurance company

60
Q

Unilateral Policy

A

Only one party to the contract (the insurance company) makes an enforceable promise - to pay covered claims IF the insured pays the premium

61
Q

Conditional policy

A

Both parties must comply with certain specified conditions.

62
Q

Principle of indemnity

A

The insured may only collect the amount of the claim, or the policy limit, whichever is less.

63
Q

Warranty

A

An absolute guarantee of truth

64
Q

Doctrine of Reasonable Expectations

A

A client may reasonably expect certain perils to be covered

65
Q

Managing General Agent

A

A person who exercises general supervision over the business of an insurance company, including hiring and firing producers

66
Q

Attorney In Fact

A

Manages a reciprocal insurance company

67
Q

Aleatory Contract

A

The outcome depends upon chance

68
Q

Estoppel

A

Once you waive a legal right, you can no longer assert it

69
Q

Doctrine of reasonable expectations

A

A policy will cover what a prudent person would expect it would

Property & Casulaty (7 decks)

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