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Insurance > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Insurance Companies

A

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

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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

The Nation Association of Insurance Commissioners (NAIC)

A

Provides resources, research, legislative, and regulatory recommendations and interpretations for state insurance regulators (No legal authority)

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7
Q

Federal Insurance Office (FIO)

A

(Dodd-Frank Wall Street Reform and Consumer Protection Act) Monitors the insurance industry and identifies issues and gaps in the state regulation of insurers.

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8
Q

Insurance is regulated at what level?

A

The State

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9
Q

Who typically appoints the Commissioner, Director, or Superintendent of Insurance?

A

The Governor

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10
Q

A _______ insurance company is owned by its policy holders.

A

Mutual

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11
Q

A _______ insurance company is owned by stockholders or shareholders.

A

Stock

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12
Q

If premiums collected are insufficient to pay losses, an assessment of additional premiums can be made

A

Reciprocal Insurance

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13
Q

Lloyd’s of London is not an insurance company, but consist of a group of underwriters called ________

A

Syndicates

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14
Q

_______ are primarily social organizations that engage in charitable and benevolent activities that can provide life and health insurance to their members

A

Fraternal benefits societies

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15
Q

Group-owned insurers that primarily assume and spread the liability-related risks of it’s members

A

Risk Retention Groups (RRG)

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16
Q

_______ assume all of the financial risk faced without transferring that risk to an insurer

A

Self-insurer

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17
Q

Residual Markets

A

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

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18
Q

Treaty

A

Reinsurance agreement that automatically accepts all new risks presented by the ceding insurer (the company seeking or requesting the reinsurance from the reinsurer)

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19
Q

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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20
Q

Independent financial rating services evaluate and rate the claims paying ability and financial stability of insurance companies

A

Financial Rating Services

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21
Q

An insurer incorporated in New York is considered a(n) ______ to New York

A

Domestic Insurer

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22
Q

An insurer incorporated in New York is considered a(n) ______ to Kansas

A

Foreign Insurer

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23
Q

An insurer incorporated in Ontario, Canada, is considered a(n) ______ to New York

A

Alien Insurer

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24
Q

Admitted vs Non-admitted

A

Refers to whether or not an insurer is approved or authorized to write business in this state

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25
Q

Who issues a Certificate of Authority

A

A State Commissioner of Insurance

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26
Q

Domicile of Insurers

A

Where an insurance company is incorporated

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27
Q

______ Oversee the operation of the business

A

Executives

28
Q

______ gather and interpret statistical information used in rate making

A

Actuarial department

29
Q

Underwriting Department

A

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

30
Q

Marketing/Sales Department

A

Responsible for advertising and selling

31
Q

Claims Department

A

Assists the policyholder, insured, or beneficiary in the event of a lost and processes, and pays the amount of the claim in a timely manner based upon the contractual provisions and the amount insured

32
Q

Exclusive/Captive Agent

A

Agent represents one company

33
Q

Direct Writing System

A

Producer or Agent is an employee of the insurer and the insurer owns the accounts

34
Q

Independent Agent

A

Enters into selling agreements with more than one insurer. Paid a commission and covers the cost of agency operations

35
Q

Career Agency System

A

Agents are recruited, trained, and supervised by either a managing employee or General Agent who is contracted with the insurance company

36
Q

Personal Producing General Agent

A

Doesn’t recruit career agents and sells insurance for carriers it is contracted with. Maintains its own office and staff

37
Q

Direct mail or Direct Response Company

A

Insurers who sell insurance policies directly to the public with licensed employees or contractors

38
Q

Mass Marketing

A

used to target a specific type of insurance to a large group of individuals (AARP)

39
Q

An individual that represents the insurance company when selling an insurance policy

A

Producer

40
Q

Authority that is written into the producer’s contract

A

Express

41
Q

Authority the public assumes the producer has

A

Implied

42
Q

Authority created when the producer exceeds the authority expressed in the agency contract

A

Apparent

43
Q

Fiduciary

A

A legal or ethical relationship of trust between two or more parties

44
Q

A licensed individual who negotiates insurance contracts with insurers on behalf of the applicant

A

Broker

45
Q

Situations where there is a chance for loss, gain, or neither

A

Speculative Risk

46
Q

Situations where there is no chance for gain

A

Pure Risk

47
Q

Physical Hazard

A

Can be seen, heard, felt, tasted, or smelled

ex. Flammable material stored near a furnace

48
Q

Moral Hazard

A

Dishonest tendencies that increase the probability of a loss

lying, cheating, or stealing

49
Q

Morale Hazard

A

Reckless or neglectful actions that increase risk

ex. Not wearing a seat belt, Smoking, etc.

50
Q

Loss exposure

A

The condition of being at risk of loss

51
Q

Adverse Selection

A

A situation that increases risk higher than the average within a specific marketplace
ex. Living in an earthquake-prone area and seeking insurance for it

52
Q

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

A

Sharing Risk

53
Q

Transferring the risk from one party to another

A

Transfer Risk

54
Q

Elimination of risk

A

Risk Avoidance

55
Q

Minimizing the chance of loss, but not preventing the risk

A

Risk Reduction

56
Q

Assume the responsibility for loss

A

Risk Retention

57
Q

Parole Evidence Rule

A

A contract cannot be altered without written consent from both parties

58
Q

Contract of Adhesion

A

A contract written by one party and no negotiation is involved

59
Q

Aleatory Contract

A

Insured’s premium payment is less than the potential benefit to be received in the event of a loss

60
Q

Personal Contract

A

A contract between the insurance company and the individual on a case by case basis

61
Q

Unilateral Contract

A

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

62
Q

Conditional Contract

A

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

63
Q

Principle of Indemnity

A

Prevents the insured from profiting from a claim

ex. a $200,000 house can not a have $300,000 policy

64
Q

Underwriting Factors

A 
Age
Gender
Tobacco use
Medical history and preexisting conditions
hazardous hobbies and occupations
65
Q

Rate

A

The dollar amount charged for a particular unit of insurance

Insurance (5 decks)

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