Basic Principles

Question 1

Actuarial Department

Answer 1

The Actuarial Department calculates policy rates, reserves, and dividends

Question 2

Alien Insurer

Answer 2

An Alien insurer in the United States is an insurer whose principal office and domiciled location is outside the country.

Question 3

Admitted Insurer

Answer 3

An insurer licensed to do business in the state or country in which the insured exposure is located.

Question 4

Broker

Answer 4

Represents themselves and the Insured (i.e. client or customer

Question 5

Captive insurer

Answer 5

Is an issuer established and owned by a parent firm for the purpose of insuring the parents firm’s loss exposure.

Question 6

certificate of authority

Answer 6

a license issued by the state to an insurance company that allows the company to conduct its business.

Question 7

claims department

Answer 7

The claims department at an insurance company is the section that manages the settling and adjusting of claims. … Determining the amount of money or other compensation to be paid to the insured for insured losses. Investigating claims to determine whether fraud has occurred

Question 8

divisible surplus

Answer 8

is the amount of earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes

Question 9

Domestic insurer

Answer 9

an insurer admitted by and formed under the laws under the state in which insurance is written.

home office in a state where it is authorized

Question 10

Foreign insurer

Answer 10

an insurer domiciled in the United States but outside the state in which the insurance is to be written

Question 11

Fraternal benefit society

Answer 11

Nonprofit benevolent organizations that provide insurance to its members.

Question 12

industrial insurer

Answer 12

make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insurers include home service or debit insurers

Question 13

Insurance

Answer 13

The transfer of risk through the pooling or accumulation of funds.

Question 14

insured

Answer 14

The insured is the customer receiving insurance protection under an insurance policy

Question 15

insurer

Answer 15

the insurance company

Question 16

Lloyds of London

Answer 16

a group of individuals and companies that underwrite unusual insurance

Question 17

multiple-line insurer

Answer 17

an insurance company that provides coverage against multiple perils
auto, home, long-term, life, and health all from one company

Question 18

mutual insurance company

Answer 18

insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.

Question 19

non-admitted insurer

Answer 19

“unauthorized insurer” is an insurer who has not received a certificate of authority from a stat’s department of insurance authorizing them to conduct insurance business in that state.

Question 20

nonparticipating policy

Answer 20

insurance policy, typically issued by stock companies, do not allow policyowners to participate in dividends or electing the board of directors

Question 21

participating plan

Answer 21

is an insurance policy under which the policyowners share in the company’s earnings through receipt of dividends and also elect the company’s board of directors

Question 22

Private (commercial) insurer

Answer 22

are companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned

Question 23

Reciprocal Insurer

Answer 23

an unincorporated organization in which all members insure on another

Question 24

Reinsurance

Answer 24

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

Question 25

Reinsurer

Answer 25

a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to

Question 26

Risk Retention Group

Answer 26

a group-owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among its members

Question 27

self-insurers

Answer 27

establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company

Question 28

Stock insurance company

Answer 28

a company owned and controlled by a group of stock holders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies

Question 29

Surplus Lines insurance

Answer 29

nontraditional insurance only available form a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers.

Question 30

Underwriting department

Answer 30

the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications

Question 31

1868 Paul V. Virginia

Answer 31

Case, which the US supreme court decided, involved one state’s attempt to regulate an insurance company domiciled in another state

Question 32

1944 United States V. Southeastern Underwriters Association (SEUA)

Answer 32

The supreme court ruled that the insurance industry is subject to a series of federal laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerce to be regulated by the federal government.

Question 33

1945 the McCarran-Ferguson Act

Answer 33

Law mad it clear that the states’ continued regulation of insurance was in the publics best interest. however, it also made possible the application of federal antitrust laws to the extent that (the insurance business) is not regulated by state law

Question 34

1958 intervention by the FTC

Answer 34

the supreme court held that the McCarran -Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further federal control, but none have been successful.

Question 35

1959 intervention by the SEC

Answer 35

Supreme court ruled that federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulation. The SEC regulates variable life insurance.

Question 36

1970 Fair Credit Reporting Act

Answer 36

requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application

Question 37

1994 United States Code (USC) Sections 1033 and 1034. According to 18 U.S.C. 1033 AND 1034

Answer 37

it is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a “Letter of Written Consent to Engage in the Business of Insurance” from the regulating insurance department of the individual’s state of residence.

Question 38

1999 Financial Services Modernization Act

Answer 38

Congress passed the financial services modernization act, which repealed the Glass Steagall Act.Under this new legislation, commercial banks investment banks, retail brokerages, and insurance companies can now enter each other’s lines of business.

Question 39

2001 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act.

Answer 39

The Patriot Act, which amends the Bank Secrecy Act (BSA), was adopted in response to the 9/11/2001 terrorist attacks. The Patriot Act is intended to strengthen US measures to prevent, detect, and deter terrorists and their funding. The act also aims to prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities.

Question 40

2003 Do Not Call Implementation Act

Answer 40

Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls

Question 41

2010 Patient Protection and Affordable Care Act (PPACA)

Answer 41

Shortened to the Affordable Care Act (ACA, it represents one of the most significant regulatory overhauls and expansions of health insurance coverage in US history

Question 42

Express Authority
Implied Authority
Apparent Authority

Answer 42

EX…is the authority a principal deliberately gives to its agent

IM…is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal

AP…is the appearance of assumption of authority based on the principal’s actions, words, or deeds.