Basic principles of insurance

Question 1

actuarial department

Answer 1

calculates policy rates, reserves and dividends

Question 2

alien insurer

Answer 2

principal office domiciled location outside country

Question 3

admitted insurer

Answer 3

authorized insurer is an insurer who has received a cert of auth from the states department of insurance authing to conduct business in that state

Question 4

broker

Answer 4

represents themselves and the insured

Question 5

captive insurer

Answer 5

issue established and owned by a parent firm for the purpose of the insuring the parents firm’s loss exposure

Question 6

certificate of authority

Answer 6

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

responsible for processing, investigating and paying claims

Question 8

divisible surplus

Answer 8

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

principal home office in state where it is auth

Question 10

foreign insurer

Answer 10

principal office or domicile location in a state different from the state it is transacting insurance business

Question 11

fraternal benefit society

Answer 11

nonprofit benevolent organizations that provide insurance to it’s members

Question 12

industrial insurer

Answer 12

special branch of industry, policies with small face amounts with weekly premiums. 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 insurer is the insurance company

Question 16

lloyds of london

Answer 16

not an insurer but a group of individuals and company’s that that underwrite unusual insurance

Question 17

multi-line insurer

Answer 17

independent agent that provides a one-stop-shop for a businesses or individuals seeking for all their insurance needs

Question 18

mutual insurance company

Answer 18

no capital stock being owned by its policy owner, usually issue participating insurance

Question 19

non admitted insurer

Answer 19

a non admitted or unauth insurer is an insurer who has not received a cert of auth from a state’s department of insurance authing them to conduct insurance business in that state

Question 20

nonparticipating policy

Answer 20

issued by stock companies do not allow policymakers to participate in dividends or electing the board of directors

Question 21

participating plan

Answer 21

under 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

companies owned by private citizens or groups that offer one or more insurance lines, not government-owned

Question 23

reciprocal insurer

Answer 23

unincorporated organization in which all members insure one another

Question 24

reinsurance

Answer 24

acceptance by one or more insurers of a portion of the risk underwritten by another insurer who has contracted for the entire coverage

Question 25

reinsurer

Answer 25

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

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

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

Question 28

stock insurance company

Answer 28

owned and controlled by a group of stockholders 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 from surplus lines insurer. offer coverage for substandard or unusual risks not available through private or commercial carriers

Question 30

underwriting department

Answer 30

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