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Basic Life And Health Insurance Principles > Basic Principles > Flashcards

Basic Principles Flashcards

1
Q

What is the Actuarial Department responsible for?

A

Calculating policy rates, reserves, and dividends

The Actuarial Department plays a crucial role in determining the financial stability of insurance products.

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2
Q

What is the role of an Adjuster?

A

Investigates claims and arranges for them to be settled or denied

Adjusters are essential in the claims process to ensure fair assessment.

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3
Q

Define Alien Insurer.

A

An insurer whose principal office and domicile location is outside the United States

Alien insurers may have different regulatory requirements compared to domestic insurers.

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4
Q

What is an Admitted Insurer?

A

An insurer that has received a certificate of authority from a state’s department of insurance

This certification allows them to conduct insurance business in that state.

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5
Q

What does an Agent do?

A

Solicits, sells, and transacts (binds) coverage for specific insurance providers

Agents operate under the terms of one or more agent contracts.

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6
Q

What is an Authorized Insurer?

A

An admitted insurer

Authorized insurers are recognized by the state’s insurance department.

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7
Q

What is the primary role of a Broker?

A

Represents himself and the insured; cannot bind coverage on behalf of an insurance carrier

Brokers act as intermediaries between clients and insurers.

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8
Q

What is a Captive Insurer?

A

An insurer established and owned by a parent firm to insure the parent firm’s loss exposure

Captive insurers allow companies to manage their own risk.

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9
Q

What is a Certificate of Authority?

A

A license issued to an insurer by an insurance department that authorizes them to conduct business in a state

This certificate is crucial for legal operation within a state.

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10
Q

Fill in the blank: A _______ is an individual or organization authorized to solicit and sell insurance coverage.

A

[Agent]

Agents have specific contracts with insurance providers.

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11
Q

True or False: A Broker can bind coverage on behalf of an insurance carrier.

A

False

Brokers do not have the authority to bind coverage.

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12
Q

What is the Claims Department?

A

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

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13
Q

What is Divisible Surplus?

A

This is the amount of earnings that are paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

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14
Q

What is a Domestic Insurer?

A

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

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15
Q

What is a Foreign Insurer?

A

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.

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16
Q

What is a Fraternal Benefit Society?

A

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

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17
Q

What is an Independent Insurance Agency?

A

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

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18
Q

What is Insurance?

A

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

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19
Q

Who is the Insured?

A

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

20
Q

What is an Insurer?

A

This is an insurance company.

21
Q

What is Lloyds of London?

A

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

22
Q

What is the Marketing Division?

A

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

23
Q

What is a Monoline Insurer?

A

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

24
Q

What is a Multi-Line Insurer?

A

This is an insurance company or independent agent that provides a ‘one-stop-shop’ for businesses or individuals 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.

25
Q

What is a Mutual Insurance Company?

A

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

26
Q

What is a Non-Admitted (Unauthorized) Insurer?

A

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.

27
Q

What is a Nonparticipating Policy?

A

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.

28
Q

What is a Participating Policy?

A

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.

29
Q

What is a Personal Producing General Agency (PPGA)?

A

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.

30
Q

Who is the Policy owner?

A

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.

31
Q

What is a Private (Commercial) Insurer?

A

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

32
Q

Who is a Producer?

A

An individual licensed by one or more states to sell, solicit, or transact insurance in a given state.

33
Q

Who is the Proposed Insured?

A

The person whose life will be covered by an insurance policy.

See also: Insured.

34
Q

What is a Public Adjuster?

A

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

35
Q

What is a Reciprocal Insurer?

A

An unincorporated organization in which all members insure one another, managed by an attorney-in-fact.

36
Q

What is Reinsurance?

A

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.

37
Q

What is a Reinsurer?

A

A company that provides financial protection to insurance companies, handling risks that are too large for insurers to cover on their own.

38
Q

What is a Risk Retention Group?

A

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

39
Q

What does the Sales Department do?

A

Acquires clients through one-on-one meetings in which consumers complete applications.

40
Q

What is the Sales Department responsible for?

A

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

41
Q

What is a Self-Insurer?

A

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

42
Q

Who are Service Representatives?

A

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.

43
Q

What do Solicitors do?

A

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.

44
Q

What is a Stock Insurance Company?

A

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.

45
Q

What is Surplus Lines Insurance?

A

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.

46
Q

What is an Unauthorized Insurer?

A

This is a non-admitted insurer.

47
Q

What is the role of the Underwriting Department?

A

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

Basic Life And Health Insurance Principles (3 decks)

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