Chapter 1

Question 1

Actuarial Department

Answer 1

This is the department that calculates policy rates, reserves, and dividends.

Question 2

Adjuster

Answer 2

This is the person who investigates claims and arranges for them to be settled or denied.

Question 3

What is an Alien Insurer?

Answer 3

An insurer whose principal office and domicile location is outside of the United States.

Question 4

What is an Admitted Insurer?

Answer 4

An insurer who has received a certificate of authority from a state’s Department of Insurance which authorizes them to conduct insurance business in that state.

Question 5

What is an Agent in insurance?

Answer 5

An individual or organization that’s authorized to solicit, sell, and transact (bind) coverage for specific insurance providers under the terms of one or more agent contracts.

Question 6

What is an Authorized Insurer?

Answer 6

An admitted insurer.

Question 7

What is a Broker?

Answer 7

A person who represents himself and the insured (i.e., the client or customer) and cannot bind coverage on behalf of an insurance carrier.

Question 8

What is a Captive Insurer?

Answer 8

An insurer that’s established and owned by a parent firm for the purpose of ensuring the parent firm’s loss exposure.

Question 9

What is a Certificate of Authority?

Answer 9

A license that’s issued to an insurer by an insurance department (or equivalent state agency) that authorizes that company to conduct insurance business in that particular state.

Question 10

What is the Claims Department?

Answer 10

The department that’s responsible for processing, investigating, and paying claims.

Question 11

What is Divisible Surplus?

Answer 11

The amount of earnings that are paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

Question 12

What is a Domestic Insurer?

Answer 12

An insurer with its principal or Home Office in the state in which it’s authorized.

Question 13

What is a Foreign Insurer?

Answer 13

An insurer whose principal office or domicile location is in a state that’s different from the state in which it’s transacting insurance business.

Question 14

What is a Fraternal Benefit Society?

Answer 14

A non-profit benevolent organization that provides insurance to its members.

Question 15

What is an Independent Insurance Agency?

Answer 15

An agency that represents any number of insurance companies through contractual agreements.

Question 16

What is Insurance?

Answer 16

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

Question 17

Who is the Insured?

Answer 17

The customer who receives insurance protection under an insurance policy.

Question 18

What is an Insurer?

Answer 18

An insurance company.

Question 19

What is Lloyds of London?

Answer 19

A group of individuals and companies that underwrite unusual insurance policies, not an insurer.

Question 20

What is the Marketing Division?

Answer 20

The division responsible for acquiring prospective applicants through various advertising media.

Question 21

What is a Monoline Insurer?

Answer 21

An insurance carrier that only sells one line of insurance.

Question 22

What is a Multi-line Insurer?

Answer 22

An insurance company or independent agent that provides a ‘one-stop-shop’ for businesses or individuals seeking coverage for all insurance needs.

Large insurers often provide individual policies for automobile, homeowner’s, long-term care, life, and health insurance needs.

Question 23

What is a Mutual Insurance Company?

Answer 23

An insurance company characterized by having no capital stock, being owned by their policy owners, and typically issuing participating insurance.

Question 24

What is a Non-Admitted (Unauthorized) Insurer?

Answer 24

An insurer that has not received a certificate of authority from a State’s Department of Insurance to conduct insurance business in that state.

Question 25

What is a Nonparticipating Policy?

Answer 25

A policy typically issued by stock companies that doesn’t allow policy owners to participate in dividends or elect the board of directors.

Question 26

What is a Participating Policy?

Answer 26

An insurance policy that pays policy dividends to policy owners, allowing them to share in the company’s divisible surplus and elect the company’s board of directors.

Question 27

What is a Personal Producing General Agency (PPGA)?

Answer 27

An agency that represents one or more specific insurers. A PPGA does not recruit, train, or supervise career agents.

Question 28

Who is the Policy Owner?

Answer 28

The person responsible for the payment of premiums and who possesses all ownership rights of the contract. Typically, the policy owner is also the insured.

Question 29

What is a Private (Commercial) Insurer?

Answer 29

An insurer owned by private citizens or groups that offers one or more insurance lines. Commercial insurers are not government-owned.

Question 30

Who is a Producer?

Answer 30

An individual licensed by one or more states to sell, solicit, or transact insurance in a given state.

Question 31

Who is the Proposed Insured?

Answer 31

The person whose life will be covered by an insurance policy.

Question 32

What is a Public Adjuster?

Answer 32

A person who acts on behalf of a consumer settling an insurance claim.

Question 33

What is a Reciprocal Insurer?

Answer 33

An unincorporated organization in which all members insure one another, managed by an attorney-in-fact.

Question 34

What is Reinsurance?

Answer 34

The acceptance by one or more insurers (reinsurers) of a portion of the risk being underwritten by another insurer that has contracted with a consumer.

Question 35

What is a Reinsurer?

Answer 35

A company that provides financial protection to insurance companies, handling risks that are too large for them to cover on their own.

Question 36

What is a Risk Retention Group?

Answer 36

A group-owned liability insurer that assumes and spreads product liability and other forms of commercial liability risks among its members.

Question 37

What does the Sales Department do?

Answer 37

Acquires clients through one-on-one meetings in which consumers complete applications.

Question 38

What is a Self-Insurer?

Answer 38

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

Question 39

Who are Service Representatives?

Answer 39

Customer service employees who are not required to obtain a license because they neither sell nor solicit coverage, and they don’t bind coverage.

Question 40

What are solicitors?

Answer 40

These are the individuals who solicit and schedule sales meetings between consumers and the producers for whom they work.

Some states separately licensed these individuals.

Question 41

What is a Stock Insurance Company?

Answer 41

This is an insurance company that’s 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, nonparticipating policies.

Question 42

What is Surplus Lines Insurance?

Answer 42

This is non-traditional insurance that’s only available from a surplus lines insurer.

This type of insurance provides coverage for substandard or unusual risks and is not available through private or commercial carriers.

Question 43

What is an Unauthorized Insurer?

Answer 43

This is a non-admitted insurer.

Question 44

What is the Underwriting Department?

Answer 44

This is the department within an insurance company that’s responsible for reviewing applications, approving or declining applications, and assigning risk classifications.