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Health Insurance > Chapter 01 > Flashcards

Chapter 01 Flashcards

1
Q

Insurance Companies

A

Insurers or Carriers
Manufacture and sell insurance
coverage in the form of insurance policies or contracts of insurance

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2
Q

Insurance Agencies

A

Are captive or independent organizations that recruit, contract with,
train, and support insurance producers

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3
Q

Insurance Producers

A

Are licensed individuals representing and appointed by an insurance
company when transacting insurance business.
GoHealth is a captive organization.

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4
Q

An Insured

A

Is the person or entity that is covered by the Insurer, which covers losses due to loss of life, health, property, or liability.

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5
Q

An Owner

A

Is not necessarily the insured under the policy but is responsible for paying the
policy’s premium and has various rights as specified in the contract.

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6
Q

National Association of Insurance Commissioners

A

Consists of all state and territorial
insurance commissioners or regulators. It provides resources, research, legislative and regulatory
recommendations and interpretations for state insurance regulators. It also promotes uniformity
among states. Members may accept or reject recommendations. The NAIC has no legal authority
to enact or enforce insurance laws.
Purpose:

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7
Q

federal agencies

A

provide regulatory oversight impacting insurance practices when states fail to do so

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8
Q

Private vs. Government Insurers

A

Most insurance is written through private insurers. governmental-based insurers step in to offer an insurance alternative when private insurers are unable to provide protection (Medicare: can be for older Americans, Medicade: the needy, such as children or disabled)

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9
Q

Stock Insurance Company

A

A stock company is owned by <b>stockholders</b> or shareholders.
Stockholders may receive taxable corporate dividends

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10
Q

Mutual Insurance Company

A

A mutual company is owned by <b>policyholders</b> (who may be referred to as members).
Policyholders may receive non-taxable
dividends

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11
Q

Reciprocal Insurance Company

A

A group-owned insurer whose main activity is risk sharing. Lower risk by spreading out.
Individuals, firms, and business corporations that exchange insurance on one another. Each member is known as a subscriber,
And each subscriber assumes a part of the risk of all other subscribers.

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12
Q

Lloyd’s of London

A

groups of underwriters called
Syndicates.
Lloyd’s provides a meeting place and clerical services for syndicate members

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13
Q

Fraternal Benefit Societies

A

Non Profit/ Charitable. Consist of churches and other small organizations.

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14
Q

Risk Retention Groups

A

Do not avoid the risk.
Risk Retention Groups are group-owned insurers that primarily assume and spread the liability related risks of its members.
Must be made up of a large number of homogeneous or similar units.
Theme parks, go-cart tracks, or water
slides.

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15
Q

Residual Markets

A

A last resort private coverage source for businesses and individuals who have been rejected by the voluntary insurance market.

(Workers’ Compensation, personal auto liability)

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16
Q

Reinsurance Companies

A

Takes on risk that an insurance company does not want to take on.
Ex. ) Company A takes 500,000 in risk and sells 200,000 of it to a reinsurance company

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17
Q

Reinsurance Types: Treaty

A

Reinsurance agreement that automatically accepts all new risks presented by the
ceding insurer

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18
Q

Reinsurance Types: Facultative

A

Reinsurance agreement that allows the reinsurance company an opportunity
to reject coverage for individual risks, or price them higher due to their substandard
(higher risk) nature.

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19
Q

Domicile

A

Jurisdiction (state or country) where an insurer is formed or incorporated

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20
Q

Domestic Insurer

A

Insurer organized under the laws of this state

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21
Q

Foreign Insurer

A

Outside the state

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22
Q

Alien Insurer

A

Outside of the country

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23
Q

Admitted (Authorized) insurer

A

is authorized by this State’s Commissioner of Insurance to do business in this State. Certificate of Authority from the State (Commissioners of Insurance)

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24
Q

Non-admitted (Unauthorized) insurer

A

applied for authorization to do business

in this State and was declined or they have not applied.

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25
Q

Surplus Lines Insurance

A

(aka Excess lines) Insurance cannot be obtained from admitted insurers so insurance can be placed through non-admitted carriers. Nothing has been admitted for what you are trying to cover

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26
Q

Actuarial Department

A

Gather and interpret statistical information used in rate making. An actuary determines the probability of loss and sets premium rates.

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27
Q

Underwriting Department

A

Responsible for the selection of risks (persons or property) to insure and rating that determines policy premiums.

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28
Q

Exclusive or Captive Agency System

A
  • Agent represents solely one company or group of companies having common ownership.
  • Insurer retains ownership rights to the business written by the agent
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29
Q

Direct Writing System

A

r Agent is an employee of the insurer

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30
Q

Law of Agency

A

Legally act on behalf of a principal, or insurance company.

Relationship between agency and principal.

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31
Q

Express authority

A

Specifically granted in the agent’s contract.

Acting within rules of a contract

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32
Q

Implied authority

A

Not specifically stated in the contract, but reasonable and necessary for the producer to carry out specifically stated duties.
Public assumes you have this authority

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33
Q

Apparent authority

A

Not valid authority. It outside of express thus outside of implied.
(take a premium after a policy has lapsed)

34
Q

Producer’s Responsibilities to the Insurer

A
  • Must keep premiums in a trust account separate from other funds and forward to insurer promptly (no commingling).
  • Must report any material facts that may affect underwriting.
  • Duty to only recommend the purchase of suitable policies.**
35
Q

Producer’s Responsibilities to Insurance Applicant or Insured

A
  • Forward premiums to insurer on a timely basis.
  • Recommend coverage that best protects the insured from possible loss and NOT the most
    profitable coverage from the perspective of the producer
36
Q

Broker

A

licensed individual who negotiates insurance contracts with insurers on <b>behalf of the applicant</b>

37
Q

Fair Credit Reporting Act - FCRA

A
  • Protects consumer privacy and protects the public from overly intrusive information collection practices.
  • When an application is taken, it must inform the applicant a credit report can be obtained.
  • Applicant can challenge inaccuracies
38
Q

Gramm-Leach-Bliley Act (the Financial Services Modernization Act of 1999)

A

To provide each consumer with a privacy notice at the time the consumer relationship is established
The privacy notice must explain:
■ The information collected about the consumer
■ Where that information is shared
■ How that information is used
■ How that information is protected

39
Q

Violent Crime Control and Law Enforcement Act of 1994

A
  • a felony for a person to engage in the business of insurance after being convicted
    of a state or federal felony crime involving dishonesty or breach of trust.
  • Applicants who have been convicted of a felony must apply for Consent to Work
  • Reciprocity – If consent is granted by any state, other states must allow the applicant to
    work in their states as well.
  • Consent Withdrawal – If conditions of consent are not continually met, the consent may
    be withdrawn.
40
Q

Risk

A

A condition where the chance, likelihood, probability or potential for a loss exists

41
Q

Speculative Risk

A

– Situations where there is a chance for loss, gain, or neither loss nor gain to occur. (investing)
Speculative risk <b>cannot be insured</b>, cannot insure when there is a chance for gain

42
Q

Pure Risk

A

– Situations where there is no chance for gain; the only outcome is for nothing to occur or for a loss to occur.

43
Q

Loss

A

Reduction, decrease, or disappearance of value.

44
Q

Peril

A

The cause or source of a loss (fire, windstorm, embezzlement, disease, death)

45
Q

Hazard

A

A specific condition that increases the probability, likelihood, or severity of a loss from
a peril.
* Smoking,

46
Q

Hazard Type: Physical

A

physical condition that increases the likelihood or probability of loss.

Example: Flammable material
stored near a furnace.

47
Q

Hazard Type: Moral Hazard

A

Intent: Dishonest tendencies that increase
the probability of a loss.

Example: An insured burns down
his/her own house to collect the
insurance payout.

48
Q

Hazard Type: Morale

A

Neglect: An attitude of indifference toward
the risk of loss that increases the
probability of a loss occurring.

Example: Driving too fast for
conditions, not wearing a seat
belt

49
Q

Loss Exposure

A

The condition of being at risk of loss. Simply by existing

50
Q

Adverse Selection

A

Risks that are hard to insure but are the only risks seeking insurance within a specific marketplace. For example, only those living in earthquake-prone areas seek to buy earthquake insurance

51
Q

Managing Risk: Sharing

A

Pooling or spreading the risk among a large number of persons or entities.

52
Q

Managing Risk: Transfer

A

Transferring the risk from one party to another, such as from a consumer to an insurance company.

53
Q

Managing Risk: Avoidance

A

Avoid the activity that gives rise to the chance of loss. After potential areas of hazards have been identified, it may be found that some
exposure to risk can be eliminated, but it is impossible to avoid all risk.

54
Q

Managing Risk: Reduction

A

Minimizing the chance of loss, but not preventing the risk. Preventative Care

55
Q

Managing Risk: Retention

A

Self-insure the entire loss or a portion of the loss. Choosing deductibles is a method of risk retention.

56
Q

Insurable Risks must Include:

A

■ Large number of homogeneous units or groups with the same perils.
■ The chance of loss must be calculable.
■ The loss must be measurable
■ loss must be accidental in nature.

57
Q

Law of Large Numbers

A

– As the number of units in a group increases, the easier it is to <b>predict</b> a particular outcome.

58
Q

Principal of Indemnity

A

Restore to prior position before loss

Insured should not profit from an insurance transaction

59
Q

Insurability

A

– The ability of an applicant to meet an insurer’s underwriting requirements

60
Q

Insurable Events

A

Any event, past or present, which may cause loss or damage, or create legal
liability on the part of an insured.

61
Q

Insurable Interest

A

Insurable interest must exist at the time of application,

62
Q

Four Elements of a Legal Contract: . Competent Parties

A

All parties to a contract, such as the insurer and policyowner, must have legal capacity to
enter into a contract.
Exclude:
□ Minors
□ The mentally incompetent or incapacitated.
□ Persons under influence of drugs or alcohol.

63
Q

Four Elements of a Legal Contract: Legal Purpose

A

All parties to a contract must enter it for a legal purpose

64
Q

Four Elements of a Legal Contract: Agreement

A

One party must make and communicate an offer to the other party and the
second party must accept that offer

65
Q

Four Elements of a Legal Contract: Consideration

A

■ Something of value is exchanged by each of the parties to the contract; the exchange of
money (first premium only) for a promise (the guarantees within the contract).

66
Q

Parol Evidence Rule

A

A written contract may not be altered without the written consent of both parties.

67
Q

Subrogation

A

Occurs when a claim is paid by the insurer who has the contract and the right to take legal action against a negligent third party who may have caused the loss. Life policies have no right of subrogation.

68
Q

Contract of Adhesion

A

One party writes the contract, without input from the other party. One party (insurer) prepares the contract and presents it to the other party (applicant) on a “take-it-orleave-it” basis, without negotiation.

69
Q

Aleatory Contract

A

The exchange of value is unequal. Insured’s premium payment is less than
the potential benefit to be received in the event of a loss. The insurer’s payment in the event of a
loss may be much greater,

70
Q

Personal Contract

A

– A contract between the insurance company and an individual. Personal
contract are specific to the person insured at the time the contract is formed.

71
Q

Unilateral Contract

A

Only one party is legally bound to the contractual obligations after the premium is paid to the insurer.

72
Q

Conditional Contract

A

Both parties must perform certain duties and follow rules of conduct to make the contract enforceable.

73
Q

Utmost Good Faith

A

No ill intent. s bargain in good faith when forming and entering into the contract.

74
Q

Representations

A

Statements made by the applicant

75
Q

Material vs. Immaterial Representations

A

Material will effect the contract

76
Q

Warranties

A

Statements in the application or stipulations that are guaranteed true
in all respects.

77
Q

Waiver

A

Voluntary surrender of a known right, claim or privilege.

78
Q

Fraud

A

Intentional deception of the truth; Disregard for the victim; Victim makes a decision and/or acts based on the belief in, or reliance upon, the false
statement; The victim’s decision and/or action results in harm.

79
Q

Estoppel

A

Estop a person from making assertions or from going back on his or her word. President has been established and must continue

80
Q

Underwriting Factors

A

■ Age
■ Gender
■ Tobacco use
■ Medical history and pre-existing conditions
■ Hazardous hobbies and occupations
(NOT marital status for health insurance)

Health Insurance (7 decks)

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