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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
Fraternal insurers
Primarily life insurance carriers that exist as social organizations and usually engage in charitable activities. (Members of a lodge or fraternal organization)
26
Reinsurance
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
27
Excess of loss basis
The reinsurer will pay only the portion of loss that exceeds a threshold
28
Quota share basis
The insurers will share loss in a pro rats or fixed percentage basis
29
Facultative basis
The insurer elects to reinsure certain risks but not others
30
Captive insurers
Formed to serve the insurance needs of their stockholders
31
Surplus Lines
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
Lloyds Association
An unincorporated group of individuals who band together to assume risks in the area of surplus lines.
33
Government Insurers
Provides life and health insurance
34
What types of insurances does the FEDERAL Government offer?
War Risk Insurance Nuclear Energy Liability Insurance National Flood Insurance Federal Crime Insurance Federal Crop Insurance Mortgage Loan Insurance
35
What plans does the government provide at STATE level?
Unemployment insurance Workers Compensation Second injury funds State ran medical insurance
36
Domestic insurer
Insurer that is incorporated under the laws of the state in which it conducts business
37
Foreign insurer
Insurer that conducts business in a state where it is NOT a resident
38
Alien insurer
Insurer that is incorporated in a country other than the US
39
Financial rating service
They rate insurance companies according to the amount of financial reserves that the company has available to pay future claims and other liabilities
40
Independent insurance producers
Sell the insurance products of several companies and work for themselves or other producers
41
Exclusive or Captive producers
Represent only one company
42
Vending machine sales
Consist of travel accident policies sold at airport counters Usually only good for that trip and usually only covers accidental death
43
Broker
An independent salesperson who selects for their client insurance coverage from whatever company best fills the clients needs.
44
Producer
An authorized person to act on behalf of another person
45
What are the three types of authority?
Express Apparent Implied
46
Express Authority
An explicit, definite agreement. The authority the principal gives the producer as set forth in the contract
47
Implied authority
Not expressly granted but it actual authority that the producer has to transact the principles business in accordance with general business practices.
48
Apparent authority
Authority a producer SEEMS to have because of certain actions taken on their part.
49
Fiduciary duty
A relationship developed when a person relies on another persons action or advice
50
Error and Omissions insurance
Needed by professionals who give advice to cover negligence, error or omission by the insurer
51
COAL contract
Consideration Offer Acceptance of the offer Legal purpose
52
Consideration
Exchange of value - the client pays the premium and the insurance company provides coverage. Doesn’t have to be equal
53
Offer
Client when they complete and sign the application and pays for first premium
54
Acceptance of the offer
When the underwriter approves the application and issued the policy for delivery
55
Legal purpose
Illegal contracts are unenforceable in court. All parties must be competent- of age, sound mind and not under the influence
56
Doctrine of adhesion
If the insurance contract language is vague or unclear, any ambiguity in I’ll be construed in favor of the insured
57
Waiver
Voluntary giving up of a known right
58
Concealment
Deliberate omission of a material fact.
59
Fraud
Deliberate attempt to deceive the producer or insurance company
60
Unilateral Policy
Only one party to the contract (the insurance company) makes an enforceable promise - to pay covered claims IF the insured pays the premium
61
Conditional policy
Both parties must comply with certain specified conditions.
62
Principle of indemnity
The insured may only collect the amount of the claim, or the policy limit, whichever is less.
63
Warranty
An absolute guarantee of truth
64
Doctrine of Reasonable Expectations
A client may reasonably expect certain perils to be covered
65
Managing General Agent
A person who exercises general supervision over the business of an insurance company, including hiring and firing producers
66
Attorney In Fact
Manages a reciprocal insurance company
67
Aleatory Contract
The outcome depends upon chance
68
Estoppel
Once you waive a legal right, you can no longer assert it
69
Doctrine of reasonable expectations
A policy will cover what a prudent person would expect it would

Property & Casulaty (7 decks)

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