Basic Principles of Life and Health Insurance Flashcards
What is the department that calculates policy rates, reserves and dividends?
Actuarial Department
What is an Adjuster?
This is the person who investigates claims and arranges for them to be settled or denied.
What is an Alien Insurer?
In the US, this is an insurer whose principal office and domicile location is outside this country.
What is an Admitted Insurer?
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.
What is an Agent?
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.
What is an Authorized Insurer?
This is an admitted insurer
What is a broker?
This is a person who represents himself and the insured. A broker cannot bind coverages on behalf of an insurance carrier because a broker is not appointed as an agent.
What is a Captive Insurer?
This is an insurer that’s established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.
What is a Certificate of Authority?
This is a license that’s issued by an insurance department that authorizes that company to conduct insurance business in that particular state.
What is the department that’s responsible for processing, investigating, and paying claims?
Claims Department
What 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?
Divisible Surplus
What is a Domestic Insurer?
This is an insurer with its principal or home office in the state in which it’s authorized.
What is a Foreign Insurer?
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.
What is a non-profit benevolent organization that provides insurance to its members?
Fraternal Benefit Society
What is an Independent Insurance Agency?
This is an agency that can represent any number of insurance companies through contractual agreements. Unlike a captive agency, they are not limited to one insurance company.
What is Insurance?
This is the transfer of risk through the pooling or accumulation of funds.
Who is the Insured?
This is the customer who receives insurance protection under and insurance policy.
Who is the Insurer?
This is an insurance company.
What is the Lloyds of London?
This is NOT an insurer but a group of individuals and companies that underwrite unusual insurance policies.
What is the division that’s responsible for acquiring prospective applicants through various advertising media?
Marketing Division
What is a Monoline Insurer?
This is an insurance carrier that only sells one line of insurance
What is a Multi-line Insurer?
This is an insurance company or independent agency that provides “one stop shop” for businesses or individuals who are seeking coverage for all of their insurance needs.
What is a Mutual Insurance Company?
This is an insurance company that is owned by their policy owners, and typically issuing participating insurance.
What is a Non-Admitted (Unauthorized) Insurer?
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.
What is a Nonparticipating policy?
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 that board of directors.
What is a Participating Policy?
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.
What is a Personal Producing General Agency (PPGA)?
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.
Who is the Policy Owner?
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.
What is a Private (Commercial) Insurer?
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.
What is a Producer?
This is an individual who’s licensed by one or more states to sell, solicit, or transact insurance in a given state.
What is the Proposed Insured?
This is the person whose life will be covered by an insurance policy
What is a Public Adjuster?
This person acts on behalf of a consumer who’s settling an insurance claim
What is a Reciprocal Insurer?
This is an unincorporated organization in which all members insure one another. An attorney-in-fact manages it
What is Reinsurance?
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.
What is a Reinsurer?
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 that they would otherwise be able to obtain.
What is a Risk Retention Group?
This is a group-owned liability insurer that assumes and spreads product liability and other forms of commercial liability risks among its members.
What is the department that acquires clients through one-on-one meetings in which consumers complete applications?
Sales Department
What is a Self-Insurer?
This is a company that establishes a self-funded plan to cover potential losses rather than transferring the risk to an insurance company?
What are Service Representatives?
These are customer services employees. Service representative are not required to obtain a license because they neither sell nor solicit coverage, and they don’t bind coverage.
What are Solicitors?
These are individuals who solicit and schedule sales meetings between consumers and the providers for whom they work. Some states separately license these individuals.
What is a Stock Insurance Company?
This is an insurance company that’s owner and controlled by their shareholders (stockholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.
What is a non-traditional insurance that’s only available from a surplus lines insurer?
Surplus Lines Insurance
What is an Unauthorized Insurer?
This is a non-admitted insurer.
What department within an insurance company that’s responsible for reviewing applications, approving or declining applications, and assigning risk classifications?
Underwriting Department
What regulates an insurer’s claim settlement practices?
State insurance departments
What is Adverse Selection?
This is defined as selection against the company or the tendency of people with higher risks to seek/continue insurance to a greater extent than those with little or less risk. This occurs when the percentage of poor risks among those covered by issued policies exceeds the ratio predicted by the actuaries when they designed the policies. This also consists of the tendency of policy owners to take advantage of favorable options in insurance contracts.
What is a Hazard?
This is any factor, condition, or situation (event) that creates an increased possibility that a peril (a cause of a loss) will actually occur.
What are Homogeneous Exposure Units?
These are similar “objects of insurance” that are exposed to the same group of perils. An “object of insurance” can be a person, a business, or a piece of property. Each “unit” represents one of many similar risks that are undertaken to be insured by an insurance company.
What is the act of restoring insureds to the financial condition that existed prior to a loss?
Indemnify
What is the amount needed to restore an individual to the financial condition prior to a loss?
Indemnity
What is an Indemnity Contract?
This is a contract that attempts to return the insured to her original financial position.
What is the Law of Large Numbers?
This is a fundamental principle of insurance. The larger the number of individual risks that are combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period.
What is a Loss?
The insurance industry defines the word “loss” as the unintentional decrease in the monetary value of an asset due to a peril.
What is Loss Exposure?
This is the risk of a possible loss
What is the Loss Exposure Unit?
This refers to each individual, organization, or asset that’s exposed to the potential of financial loss due to a defined peril. When loss exposure units are aggregated together, the maximum potential loss expresses the overall loss exposure.
What is Moral Hazard?
This is the type of hazard that exists because of an effect of an insured’s personal reputation, character, associates, personal living habits, or degree of financial responsibility. This also includes criminal activity.
What is Morale Hazard?
This is a hazard that arises from an insured’s indifference to loss because of the existence of insurance. Morale hazards are often associated with having a careless attitude.
What is a Peril?
The immediate, specific event that causes loss and gives rise to risk.
What is a Physical Hazard?
This is a physical or tangible condition that exists in a manner which makes a loss more likely to occur.
What is the Primary Insurance Company?
First policy to pay. Reinsurance - primary write a policy to cover a risk in the marketplace, then surrenders a portion of the risk to a reinsurer.
What is Pure Risk?
This is a type of risk that involves only the chance of loss only; there’s no opportunity for gain.
What is a Risk?
This is the uncertainty regarding loss.
What is Risk Avoidance?
This is occurs when individuals evade risk entirely. NOT participating in an activity that could possibly cause a loss.
What is Risk Management?
This is the process of analyzing exposures that create risk and then designing programs to address them.
What is Risk Reduction?
This is the risk management strategy that focuses on taking actions which decrease the chances of a loss occurring. It also refers to action taken to lessen the severity of a loss if one occurs.
What is Risk Retention?
This is the act of analyzing the loss exposure presented by a risk and determining that the potential loss is acceptable. Often associated with self-insurance.
What is Risk Selection?
This is not a risk management technique that’s used by consumers. This describes the insurance company’s process for determining whether to cover a new loss exposure.
What is Risk Sharing?
This is the risk management technique that manages an individual’s risk by sharing the possibility of loss with others and spreading the cost over a large number of individuals.
What is Risk Transfer?
This is the act of exchanging the responsibility for a significant potential loss (risk) to another party in exchange for a smaller, preset cost or premium.
What is Self-Insurance?
This is a risk retention process. Maintains monetary reserves to cover potential costs in the event of financial loss occurring.
What is Speculative Risk?
This is a type of risk that involves the change of both loss and gain. It is not insurable.
Insurance represents the process of Risk what?
Transference
