Chapter 1:

Question 1

Actuarial Department

Answer 1

The Actuarial Department calculates policy rates, reserves, and dividends.

Question 2

Alien Insurer:

Answer 2

An alien insurer in the U.S. is an insurer whose principal office and domiciled location is outside the country.

Question 3

Admitted Insurer:

Answer 3

An admitted or authorized insurer is an insurer who has received a certificate of authority from a states department of insurance, authorizing them to conduct insurance business in that state.

Question 4

Broker:

Answer 4

A broker represents themselves and the insured (i.e., the client or customer)

Question 5

Captive Insurer:

Answer 5

A captive insurer is an issuer established and owned by a partner firm for the purpose of insuring the parent firm’s loss exposure.

Question 6

Certificate of authority:

Answer 6

A certificate of authority as a licensed issued to an issuer by Department of insurance (or equivalent state agency), which authorizes that company to conduct insurance business in that particular state.

Question 7

Claims department:

Answer 7

The claims department is responsible for processing, investigating, and paying claims.

Question 8

Divisible surplus:

Answer 8

Divisible surplus is the amount of earnings paid to policy owners as dividends after the insurance company set aside funds required to reserves, operating expenses, and general business purposes.

Question 9

Domestic insurer:

Answer 9

A domestic insurer is an insurer with its principal or home office in a state where it is authorized.

Question 10

Foreign insurer:

Answer 10

A foreign insurer is an insurer with its principal office or domicile location in a state different from the state it is transacting insurance business.

Question 11

Fraternal benefit Society:

Answer 11

Fraternal benefit societies are nonprofit benevolent organizations that provide insurance to its members.

Question 12

Industrial insurer:

Answer 12

Industrial insurers make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insures include home service or debt insures.

Question 13

Insurance:

Answer 13

The transfer of risk through the pooling or accumulation of funds.

Question 14

Insured:

Answer 14

The insured is the customer receiving insurance protection under insurance policy.

Question 15

Insurer:

Answer 15

The insurer is the insurance company.

Question 16

Lloyd’s of London:

Answer 16

Lloyds of London is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance.

Question 17

Multi-line insurer:

Answer 17

A multi line insurer is an insurance company or independent agent that provides a one stop shop for businesses or individual seeking coverage for all their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs.

Question 18

Mutual insurance company:

Answer 18

Mutual insurance companies are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.

Question 19

Non-admitted insurer:

Answer 19

A non-admitted or unauthorized insurer is an insurer who has not received a certificate of authority from a state department of insurance, authorizing them to conduct insurance business in that state.

Question 20

Non-participating policy:

Answer 20

A non-participating insurance policy, typically issued by stock companies, does not allow policy owners to participate in dividends or electing the board of directors.

Question 21

Participating plan:

Answer 21

A participating plan is an insurance policy under which the policy owners share in the company’s earnings through receipts of dividends and also elect the companies board of directors.

Question 22

Private (Commercial) Insurer:

Answer 22

Private or commercial insurance companies are companies owned by private citizens or groups that offer one or more insurance lines. Commercial ensures are NOT government owned.

Question 23

Reciprocal insurer:

Answer 23

A reciprocal insurer is an unincorporated organization in which all members insure one another.

Question 24

Reinsurance:

Answer 24

Reinsurance is the acceptance by one or more insurers, called reinsurance, of a portion of the risk under written by another insurer who has contracted the entire coverage.

Question 25

Reinsurer:

Answer 25

A reinsurer is a company that provides financial protection to insurance companies. Reinsurance handle risks that are too large for insurance companies to handle on their own and make it possible for insures to obtain more business than they would otherwise be able to.

Question 26

Risk retention group:

Answer 26

A risk retention group is a group-owned liability insurer which assumes and spreads product liability and other forms of commercial liability risks among its members.

Question 27

Self-insures:

Answer 27

A self-ensure establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company.

Question 28

Stock insurance company:

Answer 28

A stock company is an insurance company owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the insurance of guaranteed, fixed premium, non-participating policies.

Question 29

Surplus lines insurance:

Answer 29

Surplus lines insurance is nontraditional insurance only available from a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers.

Question 30

Underwriting department:

Answer 30

The underwriting department is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications.