ch.1- Intro to General insuance Flashcards
5 functions of insurance (SBELE/I)
- Spread of Risk
- Basis of credit system
- Eliminates worry, encourages entrepreneurship
- Loss prevention + Loss reduction
- Source of employment + Investing capital
Definition of insurance: 5 IMPORTANT POINTS
5 important points:
- shifting financial responsibility
- pmt only if risk/ peril occurs
- amt of pmt is amt req to indemnify/compensate victim
- covers losses to which object of insurance MAY be exposed
- indemnity- sum of money or other thing of value (repair/replace)
DEFINITION OF INSURANCE
Undertaking by 1 person to indemnify anther against loss/liability for loss in respect of a certain risk/peril to which the object of insurance may be exposed
or
to pay a sum of money or another thing of value upon the happening of a certain event
types of p+c insurance (3)-APL
- Auto: LARGEST single class of p+c
- Property: habitational + business properties
- Liability insurance: insured financially responsible for injury/damage to others
organization of insurance (2)- list
- private insurance
- government insurers
private insurers (2 types- list)
- stock companies:
- mutual companies:
Private insurers- 2 types + define
-stock companies:
- get money from private funds/public sale
- owned by shareholders
- main purpose: profit
-mutual companies:
- owned by policyholders
- main goal: provide insurance as low a cost possible
Government insurers
- federl/provincial
- various plans: medical, emplpyment, workers comp
- in BC/SK/MB/QC: provides compulsory auto ins. + competes w/ private insurance
How insurance distributed (3 ways)
- direct writing systems
- independent brokerage system
- Agency system
Direct writing system
- producers = employees -sell only products of insurer -salary, commission, or salary + bonys -insurer owns all business
Independent brokerage system
- brokerage are owners- not emplpyees
- owns all the business
- represents multiple insurance co’s
- paid commissions by insurer
Agency system
- similiar to direct writers- rep 1 insurer
- small biz owners
- have onwers in the biz
- commissions + bonus
Lloyd of london
- not an insurance company
- doesnt transact any business itsself
- its a group of companies + individuals that assume risk thrmselves
- syndicates: composed of underwriting members/names
- underwriting agent: manages affairs of each syndicate + appoints expert underwriter
- slip: producer provides broker w/ underwriting info in folded sheet of paper
Define:
risk
peril
insert pic
3 types of insurance incl in property and casualty (p and c) insurance
Auto
property
liability