CH 1: Basic Principles of Life and Health Insurance Annuities

Question 1

Commercial Insurers: aka (Private Insurance companies

Answer 1

> Sell insurance for profit

>Two main kinds; Stock and Mutual Insurers

Question 2

An insurance company selling more than one line of insurance is called..?

Answer 2

Multi-line Insurer

Question 3

Stock companies

Answer 3

> Make Profit for and stock dividends paid to stockholders (shareholders)
Are non-participating insurers
dividends subject to taxation

Question 4

Mutual Companies are…

Answer 4

> Owned by and dividends paid to policyholders
Are Participating insurers because policyholders participate in receiving dividends and electing the board of directors
NOT subject to taxation because the dividends are a return to premium

Question 5

What is taxable for Mutual companies?

Answer 5

When policy-owner let the dividends sit and collect interest, only the accumulated interest would be taxable

Question 6

What is a Mixed Insurer?

Answer 6

When a company operates as both a participating and non-participating insurer

Question 7

Dividends are guaranteed, true or false?

Answer 7

False, they can NEVER be guaranteed regardless of the type of company offering them

Question 8

Fraternal Benefit Societies are..

Answer 8

> Type of mutual company, non-profit religious, ethnic or charitable organizations that provide insurance solely to their members

Question 9

Risk Retention groups are…

Answer 9

Mutual companies formed by a group of people in same industry or profession, i.e pharmacists, dentists and engineers

Question 10

Reinsurers

Answer 10

A company that provides financial protection to insurance companies. Companies buy insurance on their insurance to level out their claims

Question 11

The Insur-er is…

Answer 11

The insurance company doing the insuring. Also known as company, principal and carriers

Question 12

The Insur-ed is…

Answer 12

Customer/person that receives the insurance

Question 13

What are the two Service Providers?

Answer 13

> HMO (Health Maintenance Organizations) Provide prepaid medical services (Amazon Prime ex.)
PPO (Preferred Provider Organizations) Pay a membership fee and when you get serviced you get a discount

Question 14

Who is a subscriber?

Answer 14

Customers who use the services of Service providers are called Subscribers

Question 15

Ceding Company

Answer 15

Company transferring risk is called Ceding Company and company assuming risk is Reinsurer

Question 16

Types of Gov’t Insurance

Answer 16

• Social Security
• Medicare (for the Elderly)
• Medicaid (for medical assistance based on financial need)

Question 17

Lloyds of London

Answer 17

Insurance marketplace in England used for random claims

>Not Insurance company, share in unusual risk (for ex. rolls royce ownership in U.S)

Question 18

Who primarily regulates the insurance industry?

Answer 18

The States

Question 19

The 4 Laws are…

Answer 19

> Mccaren Ferguson Act(1945)(“Sun-tan” $10k)
Fair Credit Reporting Act (1970)(“Fair Fine”$5k)
Gramm-Leach-Bliley Act (1999)
USA Patriot Act (2001)

Question 20

What is your role?

Answer 20

I am the Producer/Agent

Question 21

Reserves

Answer 21

Amount of money an insurer has to have to insure the claims they anticipate will happen (what they do see coming)

Question 22

Liquidity

Answer 22

Money for what they don’t see coming

Question 23

Guaranty Associations

Answer 23

In every state, a backup bucket that insurance companies contribute to in case of becoming insolvent

Question 24

Independent Rating Services

Answer 24

Rate the financial strength of a company.

Well known ones are; A.M Best, Moody’s, Standard and Poor’s, and Fitch Ratings