Basic Principles

Question 1

Actuarial department

Answer 1

Calculates policy rates, reserves, and dividends.

Question 2

Alien Insurer

Answer 2

In the United States is an insurer whose principal office and domiciled location is outside the country.

Question 3

Admitted Insurer/Authorized Insurer

Answer 3

Is an insurer who has received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state.

Question 4

Broker

Answer 4

Represents themselves and the insured.

Question 5

Captive Insurer

Answer 5

Is an insurer established and owned by a parent firm for the purpose of insuring the parent firms loss exposure.

Question 6

Certificate of Authority

Answer 6

Is a license issued to an insurer by a department of insurance, which authorizes that company to conduct insurance business in that particular state.

Question 7

Claims Department

Answer 7

Is responsible for processing, investigating, and paying claims.

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.

Question 9

Domestic Insurer

Answer 9

Is an insurer with it’s principal or home office in a state where it is authorized.

Question 10

Foreign Insurer

Answer 10

Is an insurer with its principal or home office in a different state where it is transacting business.

Question 11

Fraternal Benefit Society

Answer 11

Are a non-profit benevolent organization that provide insurance to it’s memebers.

Question 12

Industrial Insurer

Answer 12

Make up a specialized branch of industry, primarily providing policies with small face amounts with weekly premiums.

Question 13

Lloyds of London

Answer 13

Is NOT an insurer, but a group of companies that underwrite unusual insurance.

Question 14

Multi-line Insurer

Answer 14

Is an insurance company or independent agent that provides a one-stop-shop for business or individuals seeking coverage for all their insurance needs.

Question 15

Mutual Insurance Company

Answer 15

Are insurance companies characterized by having no capital stock, being owned by it’s policy owners, and usually issue participating insurance.

Question 16

Non-Admitted Insurer

Answer 16

Is an insurer who has not received a certificate of authority from a states department of insurance authorizing them to conduct insurance business in the state.

Question 17

Nonparticipating Policy

Answer 17

Typically issued by stock companies, do not allow policy owners to participate in dividends or electing the board of directors.

Question 18

Participating Plan

Answer 18

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

Question 19

Private Insurer

Answer 19

Are Companies owned by private citizens or groups that offer one or more insurance lines.

Question 20

Reciprocal Insurer

Answer 20

Is an unincorporated organization in which all members insure one another.

Question 21

Reinsurance

Answer 21

Is the acceptance by one or more insurers, called reinsurers, of a portions of the risk underwritten by another insurer who has contracted for the entire coverage.

Question 22

Reinsurer

Answer 22

Is 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 they would other wise be able to

Question 23

Risk Retention Group

Answer 23

Is a group-owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among it’s members.

Question 24

Self-Insurers

Answer 24

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

Question 25

Stock Insurance Companies

Answer 25

Is an insurance company owned and controlled by a group of stock holders/share owners whose investment provides the safety margin necessary in the issuance of guaranteed, fixed premium, non-participating policies.

Question 26

Surplus Lines Insurance

Answer 26

Is a nontraditional insurance only available from a surplus line insurer. They offer coverage for substandard or unusual risks available through private or commercial carriers.

Question 27

Underwriting Department

Answer 27

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