Basic Concepts Flashcards
This department calculates policy rates, reserves, and dividends
Actuarial department
Insurer whose principal office and domiciled location is outside the country
Alien Insurer
Insurer who has received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state
Admitted insurer/authorized insurer
Represents themselves and the insured (client or customer)
Broker
Insurer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure
Captive insurer
Admitted/authorized insurers are issued a … by a department of insurance (or equivalent state agency), which authorizes that company to conduct insurance business in that particular state
Certificate of Authority
Department that is responsible for processing, investigating, and paying claims
Claims Department
Amount of earnings paid to policy owners as dividends after the insurance company sets asides funds required to cover reserves, operating expenses, and general business purposes
Divisible Surplus
Insurer with its principal or home offices in a state where it is authorized
Domestic Insurer
Insurer with its principal office of domicile location in a state different from the state it is transacting insurance business
Foreign Insurer
Nonprofit benevolent organizations that provide insurance to its members
Memberships based on religious, national, or ethnic lines.
More concerned about maintaining minimum reserves and surpluses for coverage than providing dividends and profits
Fraternal Benefit Society
Specialized branch of the industry that primarily provides policies with small face amounts with weekly premiums (home services or debt insurers)
Industry Insurer
Transfer of risk through the pooling or accumulation of funds
Insurance
Customer receiving insurance protection under an insurance policy
Insured
The insurance company is called…
The Insurer
NOT an insurance company, but a group of individuals and companies that underwrite unusual insurance
Lloyds of London
Insurance company or independent agent that provides a one-stop-shop for businesses or individuals seeking coverage for all their insurance needs.
Multi-line Insurer
Insurance companies characterized by having no capital stock, being owned by its policy owners , and usually issue participating insurance
Mutual Insurance Company
An insurer who has not received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state
Non-admitted Insurer
Typically insured by stock companies, do not allow policy owners to participate in dividends or electing the board of directors
Nonparticipating policy
Insurance policy under which the policy owners share in the company’s earnings through receipt of dividends and also elect the company’s directors
Participating Plan
Companies owned by private citizens or groups that offer one or more insurance lines. NOT government owned.
Private (Commercial) Insurer
Policyholders themselves insure the risk of the other policyholders. Each policyholder assumes a share of the risk brought to the company by others
Reciprocal Insurer
The acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage
Reinsurance
Company that provides financial protection to insurance companies. Handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business that they would otherwise be able to.
Reinsurer
Group owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among its members
Primary purpose of retaining or pooling risks
Formed by a group of people in the same industry or profession (pharmacists, dentists, or engineers)
Risk Retention Group
Establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company
Self-Insured
Insurance company owned and operated by a group of stockholders whose investment in the company provides the safety margin necessary in the insurance of guaranteed, fixed premium, nonparticipating policies
Purpose of making a profit for its stockholders
Stock Insurance Company
Nontraditional insurance only available from a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers
Surplus Lines Insurance
Department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classification.
Underwriting Department
- Avoidance
- Reduction
- Sharing
- Retention
- Transfer
5 Ways to Handle Risk
