Basic Principles

Question 1

This is the person who investigates claims and arranges for them to be settled or denied.

Answer 1

Adjuster

Question 2

This is the department that calculates policy rates, reserves, and dividends.

Answer 2

Actuarial Department

Question 3

In the United States, this is an insurer whose principal office and domicile location is outside this country.

Answer 3

Alien Insurer

Question 4

This is an insurer who has received a certificate of authority from a state’s department of insurance which authorizes them to conduct insurance business in that state.

Answer 4

Admitted Insurer

Question 5

This is an individual or organization that’s authorized to solicit, sell, and transact (bind) coverage for specific insurance providers under the terms of one or more agent contracts.

Answer 5

Agent

Question 6

This is an individual or organization that’s authorized to solicit, sell, and transact (bind) coverage for specific insurance providers under the terms of one or more agent contracts.

Answer 6

Agent

Question 7

This is an admitted insurer.

Answer 7

Authorized Insurer:

Question 8

This is a person who represents himself and the insured (i.e., the client or customer). A broker cannot bind coverage on behalf of an insurance carrier because a broker is not appointed as an agent.

Answer 8

Broker:

Question 9

This is an insurer that’s established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.

Answer 9

Captive Insurer:

Question 10

This is a license that’s issued to an insurer by an insurance department (or equivalent state agency) that authorizes that company to conduct insurance business in that particular state.

Answer 10

Certificate of Authority:

Question 11

This is the department that’s responsible for processing, investigating, and paying claims.

Answer 11

Claims Department:

Question 12

This is a person who represents himself and the insured (i.e., the client or customer). A broker cannot bind coverage on behalf of an insurance carrier because a broker is not appointed as an agent.

Answer 12

Broker:

Question 13

This is an insurer with its principal or home office in the state in which it’s authorized.

Answer 13

Domestic Insurer:

Question 14

This is an insurer whose principal office or domicile location is in a state that’s different from the state in which it’s transacting insurance business.

Answer 14

Foreign Insurer:

Question 15

This is a non-profit benevolent organization that provides insurance to its members.

Answer 15

Fraternal Benefit Society:

Question 16

This is an agency that any number of insurance companies through contractual agreements.

Answer 16

Independent Insurance Agency:

Question 17

This is the transfer of risk through the pooling or accumulation of funds.

Answer 17

Insurance:

Question 18

This is the customer who receives insurance protection under an insurance policy.

Answer 18

Insured:

Question 19

This is an insurance company.

Answer 19

Insurer:

Question 20

This is NOT an insurer but a group of individuals and companies that underwrite unusual insurance policies.

Answer 20

Lloyds of London:

Question 21

This is the division that’s responsible for acquiring prospective applicants through various advertising media.

Answer 21

Marketing Division:

Question 22

This is an insurance carrier that only sells one line of insurance.

Answer 22

Monoline Insurer:

Question 23

This is an insurance company or independent agent that provides a “one-stop-shop” for businesses or individuals who are seeking coverage for all of their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs.

Answer 23

Multi-Line Insurer:

Question 24

This is an insurance company that’s characterized by having no capital stock, being owned by their policy owners, and typically issuing participating insurance.

Answer 24

Mutual Insurance Company:

Question 25

This is an insurer that has not received a certificate of authority from a state’s department of insurance which authorizes it to conduct insurance business in that state.

Answer 25

Non-Admitted (Unauthorized) Insurer:

Question 26

This is a policy that’s typically issued by stock companies. This type of policy doesn’t allow policy owners to participate in dividends or to elect the board of directors.

Answer 26

Nonparticipating Policy:

Question 27

This is an insurance policy that pays policy dividends to policy owners. By receiving dividends, policy owners share in the company’s divisible surplus and also elect the company’s board of directors.

Answer 27

Participating Policy:

Question 28

This is an agency that represents one or more specific insurers. A PPGA is a similar agency system, but PPGAs don’t recruit, train, or supervise career agents.

Answer 28

Personal Producing General Agency (PPGA):

Question 29

This is the person who’s responsible for the payment of premiums and who possesses all ownership rights of the contract.
Typically, the policy owner is also the insured.

Answer 29

Policy owner:

Question 30

This is an insurer that’s owned by private citizens or groups that offer one or more insurance lines.
Commercial insurers are NOT government-owned.

Answer 30

Private (Commercial) Insurer:

Question 31

This is an individual who’s licensed by one or more states to sell, solicit, or transact insurance in a given state.

Answer 31

Producer:

Question 32

This is the person whose life will be covered by an insurance policy. (See also: Insured).

Answer 32

Proposed Insured:

Question 33

This person acts on behalf of a consumer who’s settling an insurance claim.

Answer 33

Public Adjuster:

Question 34

This is an unincorporated organization in which all members insure one another. An attorney-in-fact manages it.

Answer 34

Reciprocal Insurer:

Question 35

This is an unincorporated organization in which all members insure one another. An attorney-in-fact manages it.

Answer 35

Reciprocal Insurer:

Question 36

This is the acceptance by one or more insurers (referred to as reinsurers) of a portion of the risk being underwritten by another insurer that has contracted with a consumer to cover the entire risk.

Answer 36

Reinsurance:

Question 37

This is the acceptance by one or more insurers (referred to as reinsurers) of a portion of the risk being underwritten by another insurer that has contracted with a consumer to cover the entire risk.

Answer 37

Reinsurance:

Question 38

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

Answer 38

Reinsurer:

Question 39

This is a group-owned liability insurer that assumes and spreads product liability and other forms of commercial
liability risks among its members.

Answer 39

Risk Retention Group:

Question 40

This department acquires clients through one-on-one meetings in which consumers complete applications.

Answer 40

Sales Department:

Question 41

This department acquires clients through one-on-one meetings in which consumers complete applications.

Answer 41

Sales Department:

Question 42

This is a company that establishes a self-funded plan to cover potential losses rather than transferring the risk to an insurance company.

Question 43

These are customer service employees. Service representatives are not required to obtain a license because they neither sell nor solicit coverage, and they don’t bind coverage.

Answer 43

Service Representatives:

Question 44

These are the individuals who solicit and schedule sales meetings between consumers and the producers for whom they work.
Some states separately license these individuals.

Answer 44

Solicitors:

Question 45

This is an insurance company that’s owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.

Answer 45

Stock Insurance Company:

Question 46

This is non-traditional insurance that’s only available from a surplus lines insurer. This type of insurance provides coverage for substandard or unusual risks and is not available through private or commercial carriers.

Answer 46

Surplus Lines Insurance:

Question 47

This is a non-admitted insurer.

Answer 47

Unauthorized Insurer:

Question 48

This is the department within an insurance company that’s responsible for reviewing applications, approving or declining applications, and assigning risk classifications.

Answer 48

Underwriting Department: