Ch. 1 Flashcards
Actuarial Department
The _____ calculates policy rates, reserves, and dividends
Alien Insurer
An ______ in the United States is an insurer whose principal office and domiciled location is outside the country
Admitted Insurer
An insurer who has received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state
Broker
A ____ represents themselves and the insured (i.e., the client or the customer). Brokers help the client find the right insurance at the right price
Captive Insurer
A _____ is an issuer established and owned by a parent firm for the purpose of insuring the parent firm’s loss of exposure
Certificate of Authority
A ______ is a license issued to an insurer by a department of insurance (or equivalent state agency), which authorizes that company to conduct insurance business in that particular state
Claims Department
The _____ is responsible for processing, investigating, and paying claims
Divisible Surplus
_____ is the amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes
Domestic Insurer
A _____ is an insurer with its principal or home office in a state where it is authorized
Foreign Insurer
A _____ is an insurer with its principal office or domicile location in a state different from the state it is transacting insurance business
Fraternal Benefit Society
____ are nonprofit benevolent organizations that provide insurance to its members
Industrial Insurer
_____ makes up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names include home service or debit insurers
Insurance
The transfer of risk through the pooling or accumulation of funds
Insured
The _____ is the customer receiving insurance protection under an insurance policy
Insurer
The _____ is the insurance company
Lloyds of London
_____ Is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance
Multi-line Insurer
A _____ is an insurance company or independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs
Mutual Insurance Companies
____are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.
Non-admitted insurer
A _______ or unauthorized insurer is an insurer who has not received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state.
Nonparticipating Policy
A ______, typically issued by stock companies, do not allow policy owners to participate in dividends or electing the board of directors
Participating Plan
A ______ is an insurance policy under which the policy owners share in the company’s earnings through receipt of dividends and also elect the company’s board of directors
Private (Commercial) Insurer
______ companies are companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned
Reciprocal Insurer
A ______ is an unincorporated organization in which all members insure one another
Reinsurance
______ is insurance for insurance companies
Reinsurer
A ______ is a company that provides financial protection to insurance companies. They 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. The company assumes the risk.
Risk Retention Group
A _______ is a group-owned liability insurer which assumes and spreads product liability and other forms of commercial liability risks among its members. only has to be licensed in one state but may insure members in any State
Self-Insurer
A _____ establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company
Stock Insurance Company
A ______ is an insurance company 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
Surplus Lines Insurance
_______ is nontraditional insurance. They offer coverage for substandard or unusual risks not available through private or commercial carriers
Underwriting Department
The ______is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications
What year was the McCarran-Ferguson Act enacted?
1945
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
A nonprofit incorporated society that does not have capital stock and operated for the sole benefit of its members is known as:
Fraternal benefit society
Dividends payable to a policy owner are
Declared by the insurance company
An insurance applicant MUST. be informed of an investigation regarding his/her reputation and character according to the:
Fair Credit Reporting Act
When a policy pays dividends to its policyholders, it is said to be
Participating
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
A company that only sells one line of insurance
Monoline Insurer
A stock company may be converted into a mutual company through a process called
Mutualization
Mutual companies can convert to stock companies through a process called
Demutualization
In the rare case of a stock insurance company issuing both participating and nonparticipating policies, the company is referred to as using a
Mixed plan
The company transferring the risk is called the
Ceding Company
Benefit of Insurance
most contracts offered to individuals and organizations in society, including health, property, and casualty policies, are contracts of indemnity whose primary purpose is to pay off financial losses and reimburse the insured
Life Insurance
creates an instant estate, regardless of when death occurs
Private vs Government Insurance
Two types of insurance companies
Pure assessment mutual company
Operates on the basis of loss-sharing by group members. Essentailly divides any risk on a large group of people.
In a reinsurance agreement, the insurance company that transfers its loss exposure to another insurer is called the
Primary Insurer
The Marketing or Sales divisions
Are responsible for increasing the number of prospective applicants
Sales Department
Typically the department completing the application
Agents are also classified as:
Captive or Career agents and Independent agents
Career Agencies
Are branches of major stock and mutual insurance companies that are contracted to represent an insurer in a specific area
1868-Paul v. Virginia
This case, which the U.S. Supreme Court decided, involved one state’s attempt to regulate an insurance company domiciled in another state
1944- United States v. Southeastern Underwriters Association (SEUA)
Ruled that the insurance industry should be subject to federal regulation.
1945- The McCarran- Ferguson Act
Entrusts states with the authority and responsibility for the regulation of the business of insurance
1958- Intervention by the FTC
The Supreme Court held that the McCarran-Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further federal control, but none have been successful
1959- Intervention by the SEC
The Supreme Court ruled that federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulations. The SEC regulates variable life insurance
1970- Fair Credit Reporting Act
Requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application
1994- United States Code
it is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a “Letter of Written Consent to Engage in the Business of Insurance” from the regulating insurance department of the individual’s state of residence
1999- Financial Services Modernization Act
Act passed by Congress which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages, and insurance companies can now enter each other’s lines of business
2001- Uniting and Strengthening America Act
The Patriot Act, which amends the Bank Secrecy Act (BSA), was adopted in response to the September 11, 2001, terrorist attacks. The Patriot Act is intended to strengthen U.S. measures to prevent, detect, and deter terrorists and their funding. The act also aims to prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities
2003- Do Not Call Implementation Act
The Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls
2010- Patient Protection and Affordable Care Act
Often shortened to the Affordable Care Act (ACA), it represents one of the most significant regulatory overhauls and expansions of health insurance coverage in U.S. history
