Chapter 1 Flashcards
Stock Insurance Company
Corporation owned by its shareholders.
Shareholders purchase shares and are interested in making a return on their investment. Policy holders pay a premium for insurance protection but have no financial interest in the company.
Mutual insurance companies
Type of co-operative owned by its policyholders.
The primary purpose of a mutual company is to insure the losses of its members. Profits made by a mutual company will be paid as a dividend to the members or used to reduce premium.
Captive insurance company
Owned by its parent company for the purpose of funding their losses.
Lloyds of London
An insurance market.
Syndicates are set up to accept risk on behalf of the syndicate. They are known for insuring complex, unusual risks.
Treaty Reinsurance
Automatic reinsurance.
Insurer must cede risk and reinsurer must accept risk.
- Usually arranged on an annual basic
- Less expensive
- Less flexible
- Automatic-does not need binding instructions
Facultative Reinsurance
Not automatic–per risk basis
Choice to reinsure or not.
- May be annual but can be for whatever period it is.
- More expensive to administer
- More flexible
- Binding instructions must be given
Broker
Independent business person who is authorized to sell insurance policies on behalf of an insurer. They usually represent many insurers.
Agent
Represents one company only. Employees of an insurance company.
Staff and company adjusters
They are the same.
Public adjuster
Paid by the insured
Independent adjuster
Paid by the insurer
Company adjusters
Salaried by insurance company
Major function of insurance
Spreading the losses of the few among many
Underwriter
An insurance professional who determines risk acceptance or rejection on behalf of an insurance company.
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Additional charge included in an insurance rate to reflect a hazard not contemplated in the base rate for the class of risk.
Loss severity
Refers to how serious a potential loss might be.
Claims adjuster
Investigates, negotiates, and settles claims
Once insurance is indemnified
Any salvage belongs to the insurance company.
Salvage
The portion of property remaining after a loss that still has some value or usefulness.
Public adjuster
One who is hired and paid for by an insured to represent their interested in a claim.
indemnified
Put back to the same financial position as they were before the loss happened.
Insurance is about protection
It is about providing an insured with peace of mind.
Negligence
The omission or failure to do something which a reasonable person would do.
OR doing something which a prudent and reasonable person would not do.
Mutual insurance companies
Are a type of co-operative owned by its policy holders.
The primary purpose of a mutual company is to insure the losses of its members (the policyholders)
Stock companies
Corporation owned by its shareholders.
Most insurance companies in Canada are stock companies.
Lloyds of London
Not an insurance company. It’s an insurance market.
Loss frequency
Refers to the probability or likelihood of a loss occurrence.
Loss severity
Refers to how serious a potential loss might be.
Unearned premium
Premium that has been collected for a portion of a policy but has not yet expired.
Law of large numbers
Sufficient number of previous losses must exist in order for predictions about the future to be statistically credible.
Law of large numbers
Sufficient number of previous losses must exist in order for predictions about the future to be statistically credible.
Underwriter
Insurance professional who determines risk acceptance or rejection on behalf of an insurance company.
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An additional charge included in insurance rate to reflect a hazard not contemplated in the base rate for the class of risk.
Public adjuster
One who is hired and paid for by an insured to represent their interests in a claim.
Claims examiner
specialist who directs loss investigations, oversees adjusting work and examines reports submitted by independent adjusters.
Independent Adjuster
- Works for an independent adjusting firm
- Accepts claim assignments from insurance companies
- Reports facts of claims to insurer and awaits settlement instructions.
Staff or Field ajuster
- Handles claims requiring investigation
- Salaried employee of an insurance company
- Has authority to commit insurer usually up to a specified dollar limit
Telephone Adjuster
- Usually handles a large volume of small losses
- Claims are not handled face to face but by telephone
- Salaried employee for an insurance company
Reasons for reinsurance
- To increase capacity
- To provide stability in times of market fluctuation
- To maintain balance between asset reserves and liabilities
- To close insurance operations
- To reduce the impact of catastrophic losses.
