Ch1: Intro to Insurance

Question 1

What is Insurance?

Answer 1

an undertaking by one party to indemnify another if a specific peril damages an object of insurance.

Question 2

What are the 5 functions of Insurance

Answer 2

1. Spread Risk
2. Loss Prevention/Reduction Measures
3. Peace of Mind
4. Supply Credit
5. Source of Jobs & Capital

Question 3

What is Indemnity?

Answer 3

The amount necessary to cover the loss

Question 4

What are the 3 types of general insurance?

Answer 4

1. Automobile
2. Property
3. Liability

Question 5

Describe a “Stock Company”

Answer 5

owned by shareholders and are profit oriented.

Question 6

Describe a “Mutual Company”

Answer 6

owned by policyholders and NOT profit oriented

Question 7

Describe a “Direct Writer”

Answer 7

Insurer sells its own products direct to consumer using employees

Question 8

What is a “Producer?”

Answer 8

an employee

Question 9

Describe an “Independent Broker”

Answer 9

represents more than one insurer and gets commission

Question 10

Describe an “Agency System”

Answer 10

small business owners - get commission and own their book of business

Question 11

What do the Lloyds of London do?

Answer 11

Insure items that are typically uninsurable in the “normal market”

Question 12

Who are the Lloyds of London?

Answer 12

a group of underwriters who assume the risk themselves

Question 13

Define “Syndicates”

Answer 13

a group of underwriters

Question 14

Define “Underwriting Agent”

Answer 14

the one who manages all the syndicates and can appoint a lead underwriter

Question 15

Define “Lead Underwriter”

Answer 15

An expert in a specific class of business

Question 16

Describe the 3 business process with the “Lloyds of London”

Answer 16

1. producer provides broker with the underwriting info on a “slip” (application)
2. underwriters commit to a % of the risk - until policy is fully subscribed
3. completed “slips” are sent to Lloyds Policy signing office