Chapter 1 Flashcards
Is an insurer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.
Captive Insurer
Is reponsible for processing, investigating, and payin claims.
Claims Department
Is the amount of earnings paid to policyowners as dividends after teh insurance company sets aside funds required to cover resersves, operating expenses, and general business purposes.
Divisible Surplus
Is an insurer with it’s principal or home office in a state where it is authorized.
Domestic Insurer
Are nonprofit benevolent organizations that provide insurance to its members.
Fraternal Benefit Societies
Is an insurer with it’s principal office or domicille location in a state different from the state it is transacting insurance business.
Foreign Insurer
Make up a specialized branch of the industry, primarily providing polices with small face amounts with weekly premiums. Other names for industrial insurers inclde home service or debit insurers.
Industrial Insurers
The transfer of risk through the pooling or accumulations of funds.
Insurance
Is the customer receiving insurance protection under an insurance policy.
Insured
Is the insurance company
Insurer
Is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance
Lloyds of London
is an insurance company or independent agent that provides a one-shop for business or individual seeking coverage for all their insurance needs. For example, many large insurers offer indidvual policies for automobile, homowner, long-term care, life, and health insurance needs.
multi-line insurer
Companies are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.
Mutual Insurance Company
Or unathorized insurer is an insurer who has not recieved a certificate of authoriy from a state’s department of insurance authorizing them to conduct insurance business in that state.
Non-admitted Insurer
Insurance policy typically issued by stock companies, do not allow policyowners to particiapte in dividends or electing the board of directors.
Nonparticipating Policy
Is an insurance policy under which the policyowners share in the companys earning through recipt of dividends and also elect the companys board of directors.
Participating Plan
Insurance companies are companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned
Private (Commerical) Insurer
Is an unincorporated organization in which all members insure one another
Reciprocal Insurer
Is the acceptance by one or more insurers, called reinsurers of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.
Reinsurance
Is a company that provides financial protection to insurace companies. Handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more bsuiness than they would otherwise be able to.
Reinsurer
Is a groupd-owned liability insurer which assumes and spread product liability and other forms of commerical liablilty riskes among its members.
Risk Retention Group
Establishes a self-funded plan to cover potential losses instead of transferriring the risk to an insurance company.
Self Insurers
Is an insurance company owned and controlled by a group of stockholders (or share holders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fix premium, nonparticipating polices.
Stock Insurace Company
Is nontraditional insurace only available form a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers
Surplus Lines Insurance
Is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications.
Underwriting Department
Or authorized insurer is an insurer who has received a certificat of authority from a state’s department of insurance authorizing them to conduct insurance business in that state.
Admitted Insurer
Is a license issued to an insurer by a department of insurance (or equivalent state agency) which auhtorizes that company to conduct insurance business in that particular state.
Certificate of Authority
Calculates policy rates, reserves, and dividends
Actuarial Department
In the United States is an insurer whose principal office and domiciled locaton is outside the country.
Alien Insurer
Represents themselves and the insured (i.e., the client or customer).
Broker
Indicates a company’s ability to make unpredictable payouts to policyowners.
Liquidity
Are the accounting measurement of an insurer’s future obligations to its policyholders.
Reserves
In the insurance industry a rating service company’s primary purpose is to determine the financial strength of the industry’s insurers.
Rating Service
Is the appearance or assumption of authority based on the principals actions, words or deeds.
Apparent authority
Is the unwritten authority that is not expressly granted but which the agent is assumed to have in order to transact the business of the principal.
Implied Authority
A principal deliberately gives to its agent
Express authority
Is a person who acts for another person or entity known as the principal with regard to contractual arrangements with third parties.
Agent
Often shortened to the affordable care act (ACA) It represents one of the most significant regulatory overhauls and expansions of health insurance coverage in U.S history.
2010-Patient Protection and Affordable Care Act (PPACA)
Allows consumers to include thier phone numbers on the list to which telemarketers cannot make solicitation calls.
2003- Do Not Call Implemenation Act
The Patriot act which amends the bank secrecy Act (BSA) was adopted in response to the September 11, 2001 terrorist attacks the Patriot Act is intented to strengthen U.S measures to pervent detect and deter terriosts and thier funding. The act also aims to prosecute international money laudering and the financing of terrorism. These efforts include anit-money laundering (AML) tools that impact the banking financial and investment comunities.
2001-Uniting and strenghtening America by providing appropriate tools required to interupt and obstruct Terrorism Act
Congress passed ____ which repealed the glass steagall Act under this new legislation, commercial banks investment banks retail brokerages and insurance companies can now enter each others lines of business.
1999-Financial Services Modernization Act
It is a criminal offense for an indvidual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or particiapte (in any capacity) in the bueisness of insuance without first obtaining a “letter of written consent to engage in the business of Insurance” from the regulating insurance department of the individuals state of residence.
1944-United States Code (USC) Section 1033 and 1034. According to 18 U.S.C 1033 And 1034
Requires fair and accurate reporting of information about consumers, including applications for insurance Insurers must inform applicants about any investigation that are being made upon completion of the application.
1970-Fair Credit Reporting Act
The suprem court ruled that federal securites laws applied to insurers that issued variable annuties and thus required these insurers to confirm to both SEC and state regulation. The SEC regulates variable life insurance.
1959-Intervention by the SEC
suprem court held that the McCarran-Ferguson Act disallowed such supervision by the FTC, a federal agency. Additonal attempts have been made by the FTC to force further federal control but none have been succesful.
1958-Intervention by the FTC
This law made it clear that the states continued regulation of insurance was in the publics best interest. However it also made possible the application of federal antitrust laws to the extent that (the insurance business) is not regulated by state law.
1945-The McCarran Ferguson Act
In the SEUA case the suprem court ruled that the insurance industry is subject to a series of federal laws many of wihich conflicted with existing state laws. As such insurance is a form of interstate commerce to be reguated by the federal government.
1944-United States v. Southeastern underwriters Association (SEUA)
This case which the U.S suprem court decided involved one state’s attempt to regulate an insurance company domiciled in another state.
1868-Paul v Virginia
Operates on the basis of loss-sharing by group members.
Pure Assessment Mutual company
The company assuming the risk.
Reinsurer
The company transferring the risk.
Ceding Company
Is not an insurer but rather a syndicate of individuals and companies that individually underwrite insurance.
Lloyd’s of London
the organization must be nonprofit have lodge system that includes ritualistic work and maintain a represtative form of government with elected officers.
Fratrnal benefit socity
Are organized on the basis of ownership by their policy-holders.
Reciprocal insurers
Risk purchasing group only has to be licensed in one sate but may insure members in any state.
Risk retention group
is the amount of earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves operating expenses and general business purposes.
Divisible surplus
allow policyholders to participate in the company by electing the board of directors and receiving dividends from the divisible surplus.
Participating
Are referred to as paricipating companies because the policyowners participate in dividends.
Mutual Companies
Do not allow policyholders to participate in board elections or dividends and instead aim to increase profit for the shareholders.
Nonparticipating
Typically issues nonparticipating insurance policies
Stock insurance company
Two types of insurance companies
Private vs. Government Insurance
creates an instant estate, regardless of when death occures.
Life Insurance
May or may not be policy holders.
Stockholders
Companies that sell more than one line of insurance
Multi-line insurers
Insurance evolved to produce a practical solutions to economic uncertainties and losses.
practical solution
Is that most contracts offered to individuals and organizations in society, including health, property and casualty polices are contract of indemnity whose primary purpose is to pay off financial losses and reimburse the insured
Benefit of Insurance
Is the transfer of risk from one party to another through a legal contract or the transfer of risk through the pooling (accumulation of funds)
Insurance
In a reinsurance agreement the insurance company that transfers its loss exposure to another insurer is called the primary insurer
Primary Insurer
The most common reinsurance contract between two insurance companies, which involves an automatic sharing of the risk asuumed.
Treaty reinsurance
An insurer establised and owned by a parent firm for the purpose of insuring the parent firms loss exposure.
Captive Insurer
Refer to the non traditional insurance market
Surplus Lines
characterized by relatively small face amounts with premiums paid weekly.
Industrial Insurance
establishes a self funded plan to cover potential losses
Self Insurer
divisions are responsible for increasing the number of prospetive applicants.
Marketing or Sales
typically the department completing the application.
Sales Department
responsible for reviewing applicantions, conducting investigations to gain additional informatoin about applicants assigning risk classifications and approving or deciding an applicantion.
Underwriting department
is responsible for processing, investigating and paying claims for losses incured by insureds.
claims department
calculates policy rates, reserves and dividends and make other applicable statistical studies and reports focusing on mortality tables.
Acturial department
between the insured or beneficiary and the insurer, the agents who solicits and insurance applications represents the insurer and not the insured or beneficiary.
Dispute
Agents are also classified as captive
Captive, career agent, independent agent
are branches of major stock and mutual insurance companies that are contracted to represent an insurer in a specific area.
career agencies
