Basic Principles Of Life And Health Insurance Flashcards
Is a legal contract that transfers an uncertain risk from one party to another. The insured transfers, the possibility of suffering, a large financial loss to an insurer in return for paying a relatively small, contractually defined premium.
Insurance
When an insurance policy restores an insured to the financial position, he or she experienced before an insured loss. Insurance companies _________ they’re insured when covered losses occur.
Indemnify
Nonparticipating insurance companies are also known as:
Stock companies
Stock insurers issue ___________ insurance policies because policy owners are not stockholders and therefore, are not owners.
Non-participating
Participating insurance companies are also known as:
Mutual companies
• the policy holders own mutual insurance companies
• the revenue paid out in the form of policy dividends is referred to as the divisible surplus
What type of company? Hint: think participating
Mutual companies
Participating policies: are when policy owners receive a share of surplus revenue in the form of policy dividends.
What type of insurance companies sell participating policies?
Mutual insurance companies
To pay for claims this type of insurance company assesses premiums at the time members experience loss.
Assessment mutual insurers
• not for profit organizations that are noted for their social, charitable, and benevolent activities.
• membership is based on a common bond, and these organizations may be formed around a common religion, nationality, ethnicity, charitable, cause, or other affiliation.
Fraternal benefits societies
Each policy owner individually assumes a share of another’s risk. This type of insurance contracts, a form of risk sharing rather than risk transfer.
Reciprocal insurers
A specialized insurance company that provides liability insurance for individuals and entities with a common bond
Risk retention groups (RRGs)
_____________ buys coverage for its members, which must have a common bond.
• this type of group becomes a master policyholder, and it’s members receives certificates of insurance.
Risk purchasing groups (RPGs)
___________ provide insurance for other insurance companies.
Reinsurers
In the concept of reinsurers, the primary insurer is also referred to as:
a ceding insurer
The maximum amount of exposure that the insurer can carry when ensuring a single risk
Risk retention limit
____________ exists when a reinsurer enters into a contract with a primary insurance company to automatically assume it’s excess exposure for risks that meet contractually defined criteria. This agreement is also referred to as automatic reinsurance.
Treaty reinsurance
When a primary insurer seeks reinsurance for a specific exposure without an ongoing agreement, it’s referred to as:
Facultative reinsurance
A ____________ is established to cover the loss exposure of the parent organization that owns it
Captive insurer
______________ are unauthorized insurers that provide coverage when authorized insurers reject buyers or authorized insures don’t offer the type of insurance being sought.
Surplus lines insurance carriers
___________ is a syndicate of individuals that individually underwrite special (unique) risks.
Lloyds of London
An _____________________ describes an insurer that has been issued a certificate of AUTHORITY from a state’s insurance department authorizing the insurer to transact insurance in that state. Insurers must receive a certificate of authority from each state they wish to transact insurance.
Authorized or admitted insurer
An _________________ company is prohibited from conducting insurance operations in that particular
Unauthorized (non-admitted) insurance
_____________ is organized and incorporated in the state in which it’s writing business
Domestic insurer
____________ is organized under the laws of a different state
Foreign insurer
_________________ is organized under the laws of a different nation
Alien insurer
The term ___________ describes an individual or organization that is licensed by a state to solicit, cell, or transact insurance in that state.
Producer
_____________ identify, examine, assess, and classify loss exposures.
They also approve or decline applications and determine the cost of insurance
Underwriters
___________ calculate policy rates, reserves, and dividends.
Actuaries
_________________ is an industry association of state insurance regulators focused on establishing model, acts and regulations that provide a common framework for state officials to address industrywide issues. These regulatory models help streamline legislative and administrative processes while encouraging uniform standards.
National Association of insurance commissioners (NAIC)
The NAIC list 4 objectives:
- To encourage regulatory uniformity among the states.
- To promote efficient regulatory administration.
- Protect policy owners and consumer interests.
- To preserve state regulation of the insurance industry.
The NAIC’s ______________ label certain words and phrases as inherently misleading and bans their use.
Model advertising code
_____________ gives a state insurance department the power to:
• investigate insurance companies and producers
• issue cease and desist orders
• impose penalties
• seek a court injunction to restrain unfair activities
UTPA
NAIC Unfair Trade Practices Act (model act)
____________ is an association of state legislators that serves on insurance and financial institutions committees to educate policy makers and preserve state regulation. Also rights model laws.
The national conference of Insurance legislators (NCOIL)
______________ describe companies that determine an insurer’s financial strength. These services publicize the financial health of insurers after analyzing company reserves, and liquidity.
Rating services
At what point must a life insurance applicant be informed of their rights that fall under the fair credit reporting act?
Upon completion of the application
An insurance applicant must be informed of an investigation regarding his or her reputation and character according to the:
Fair credit reporting act
A nonprofit incorporated society that does not have capital stock and operates for the soul benefit of its members is known as:
A fraternal benefits society
Which of the following requires insurers to disclose when an applicants consumer or credit history is being investigated?
The fair credit reporting act - 1970
Which of these describe a participating insurance policy?
Policy owners are entitled to receive dividends
