CH 1: Basic Principles of Life and Health Insurance Annuities Flashcards
Commercial Insurers: aka (Private Insurance companies
> Sell insurance for profit
>Two main kinds; Stock and Mutual Insurers
An insurance company selling more than one line of insurance is called..?
Multi-line Insurer
Stock companies
> Make Profit for and stock dividends paid to stockholders (shareholders)
Are non-participating insurers
dividends subject to taxation
Mutual Companies are…
> 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
What is taxable for Mutual companies?
When policy-owner let the dividends sit and collect interest, only the accumulated interest would be taxable
What is a Mixed Insurer?
When a company operates as both a participating and non-participating insurer
Dividends are guaranteed, true or false?
False, they can NEVER be guaranteed regardless of the type of company offering them
Fraternal Benefit Societies are..
> Type of mutual company, non-profit religious, ethnic or charitable organizations that provide insurance solely to their members
Risk Retention groups are…
Mutual companies formed by a group of people in same industry or profession, i.e pharmacists, dentists and engineers
Reinsurers
A company that provides financial protection to insurance companies. Companies buy insurance on their insurance to level out their claims
The Insur-er is…
The insurance company doing the insuring. Also known as company, principal and carriers
The Insur-ed is…
Customer/person that receives the insurance
What are the two Service Providers?
> 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
Who is a subscriber?
Customers who use the services of Service providers are called Subscribers
Ceding Company
Company transferring risk is called Ceding Company and company assuming risk is Reinsurer
Types of Gov’t Insurance
- Social Security
- Medicare (for the Elderly)
- Medicaid (for medical assistance based on financial need)
Lloyds of London
Insurance marketplace in England used for random claims
>Not Insurance company, share in unusual risk (for ex. rolls royce ownership in U.S)
Who primarily regulates the insurance industry?
The States
The 4 Laws are…
> Mccaren Ferguson Act(1945)(“Sun-tan” $10k)
Fair Credit Reporting Act (1970)(“Fair Fine”$5k)
Gramm-Leach-Bliley Act (1999)
USA Patriot Act (2001)
What is your role?
I am the Producer/Agent
Reserves
Amount of money an insurer has to have to insure the claims they anticipate will happen (what they do see coming)
Liquidity
Money for what they don’t see coming
Guaranty Associations
In every state, a backup bucket that insurance companies contribute to in case of becoming insolvent
Independent Rating Services
Rate the financial strength of a company.
Well known ones are; A.M Best, Moody’s, Standard and Poor’s, and Fitch Ratings
