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Insurance License > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Define Insurer

A

manufacture and sell insurance coverage by way of insurance policies or contracts.

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2
Q

Define Insurance Agencies

A

independent organizations that recruit, contract with, and support sales agents and producers.

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3
Q

Define Insured

A

is the person or entity that buys insurance for protection from loss of life, health, property or liability.

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4
Q

Define Insurance Agents/ Producers

A

licensed individuals representing an insurance company when transacting insurance.

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5
Q

Define National Assoc. of Insurance commissioners.

A

The NAIC provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators. The association promotes uniformity among states and members may accept or reject recommendations. The NAIC has no legal authority to enact or enforce insurance laws.

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6
Q

Define FIO

A

This office monitors the insurance industry and identifies issues and gaps in the state regulation of insurers. It also monitors access to affordable insurance by traditionally underserved communities and consumers, minorities, and low- and moderate-income persons. The FIO is not a regulator or supervisor.

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7
Q

Who is Insurance primarily regulated by?

A

The States

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8
Q

In a reciprocal insurance company what is their main activity?

A

Risk Sharing

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9
Q

What is thei purpose of the Lloyds of London?

A

They specialize in insuring a particular type of risk. They provide a meeting place and clerical services.

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10
Q

How does the Fraternal Benefits Society function?

A

Through engaging in charitable and benevolent activities that provide health and life insurances to members.

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11
Q

How do risk retention groups work?

A

It must be made of a large number of similar units and membership is limited to risks with exposure or similar liability needs. Must have sufficient liquid liquid assets to meet loss obligations.

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12
Q

When do individuals or businesses go as a last resort when rejected by voluntary market insurers?

A

Residual Market coverage

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13
Q

What is the role of reinusrance companies?

A

to assume all or a portion of a risk for a primary company, to eliminate the risk between the companies.

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14
Q

Define 2 types of reinusrance

A

treaty agreements- covers all risk automatically. Facultative- allows the ability to negotiate coverage

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15
Q

What is the purpose of a financial rating service?

A

evaluate and rate the financial stability of insurance companies

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16
Q

What does the term domicile refer to?

A

The jurisdiction (location) where an insurer is formed or incorporated.

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17
Q

What are the 3 types of Domiciles?

A

Domestic, Foreign and Alien.

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18
Q

What does an admitted insurer have?

A

A certificate of authority to do business in this state.

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19
Q

Why are non admitted insurers unauthorized to transact insurance ?

A

Their application was denied or they did not apply

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20
Q

Does a domicile impact whether or not an insurer may be admitted to business in a particular state?

A

NO

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21
Q

What is the purpose of Surplus Lines Insurance?

A

To find coverage when the kind/amt of insurance cant be obtained from admitted insurers.

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22
Q

How can a non-admitted business be transcated?

A

Through Surplus Lines Broker

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23
Q

Who is responsible for evaluating the acceptability of a risk and (once accepted) determines the actual rate to be charged?

A

Underwriting

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24
Q

How does the Captive Agency system work?

A

The insured is dealt with through an exclusive agent..

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25
Q

How does the direct writing system work?

A

The producer is an employee of that specific insurer.

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26
Q

How does an independent agency work?

A

An agent that has unlimited amount of insurers/ Agency retains ownership and an independent contractor is paid a commission.

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27
Q

How does a Career Agency system work?

A

Agents are recruited, trained and supervised by managing an employee or General Agent.

28
Q

How does a personal producing general agent work?

A

Career agents are not recruited, they sell insurance for their carriers and maintains its own staff and office/

29
Q

How does direct mail work?

A

they specialize in recruiting customeres through direct mail, newspapers or TV.

30
Q

Which method of marketing is used to target a specific type of insurance to a large group of individuals? (aarp for ex)

A

Mass Marketing

31
Q

What are two examples of the producers responsibility to the insured?

A

Seek and gain knowledge of applicants needs and recommend coverage that best protects the insured from possible loss// NOT the most profitable.

32
Q

What are two examples of the producers responsibility to the insurer?

A

Must report any material facts that may affect underwriting, recommend only the purchase of suitable policies.

33
Q

a misstatement of material fact by a person who knows or believes that statement to be false

A

Fradulent act

34
Q

What does the Jones Act or Merchant Marine act of 1920 do?

A

It allowed insured seamen to make claims for injuries suffered during the course of employment.

35
Q

Motor Carrier Regulatory and Modernization Act (the Motor Carrier Act of 1980)

A

Deregulated the trucking industry by prohibiting any entity from interferring with a motor carriers right to set their own rates.

36
Q

Gramm-leach-bliley act

A

allowed the merger of banks, security companies and insurance companies to merge.

37
Q

What does the Fair Credit Reporting act do?

A

Protects the privacy of the client.

38
Q

What act made it a felony for a person to engage in the business of insurance after being convicted of state or federal felony involving dishonesty.

A

TRIA

39
Q

What is a breach of trust?

A

Violating a fiduciary relationship of parties and the wrongful acts violating them.

40
Q

Tell me 3 ways to manage risk

A

Sharing, Transfer, Avoidance, Reduction, retention

41
Q

What is the practice of analyzing exposures that create risk and designing programs to minimize that probability of loss?

A

Managing Risk

42
Q

How does sharing help manage risk?

A

Getting investments from a large number of people

43
Q

Requirements of Insurable risks must include ALL But which? • Large number of homogenous units or groups with the same perils.
o Law of Happiness
o Law of Large Numbers – As the number of units in a group increases, the more likely it is to predict a particular outcome.
o Auto insurance losses are the easiest type of insurance loss to predict precisely because the number of units insured is so great.
• The chance of loss must be calculable. A statistical expectation of loss is used by insurers to calculate premiums.
• The loss must be measurable (definite and verifiable in terms of amount, cause, place and time).
• The premiums must be affordable.
• From the perspective of the insured, the loss must be accidental in nature.
• Catastrophic perils are not covered; examples include war, nuclear hazard and illegal operations.

A

Law of happiness

44
Q

Define Indemnify

A

Compensate for harm or loss

45
Q

Define Insurability

A

The ability of an applicant to meet an insurers underwriting requirements

46
Q

Insurable Events

A

Any event, past or present, that might cause loss or damange or legal liability on the part of an insured

47
Q

What are civil wrongs that result in injuries or harm that constitute the basis of a claim by a third party law?

A

Tort Law

48
Q

Define Estoppel

A

Prevents the denial of a fact that was admitted to be true previously

49
Q

Which rule makes it so that a written contract may not be altered without the written consent of both parties?

A

The Parol Evidence Rule

50
Q

What are the 4 parts of a legal contract?

A

Competent parties, legal purpose, agreement and consideration.

51
Q

Define Contract of Adhesion

A

One party writes the contract, without input from the other party; one party (insurer) prepares the contract and presents it to the other party (applicant) on a “take-it-or-leave-it” basis, without negotiation.

52
Q

Define Aleatory

A

The exchange of value is unequal

53
Q

What is a valued contract?

A

A contract that pays a stated amount in the event of a loss

54
Q

What is an indemnity contract?

A

An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs.

55
Q

What is a unilateral contract?

A

When only one party is legally bound to the contractual obligations.

56
Q

What is a conditional contract?

A

When both parties must perform certain duties and follow rules of conduct to make the contract enforceable.

57
Q

What is a misrepresentation?

A

A falso statement contained in the application, usually not to void coverage.

58
Q

What is concealment?

A

Willingly holding back information pertinent to the issuance of insurance. (OR CLAIM)

59
Q

What are statements in the application that are guaranteed true in all respects?

A

Warrantes

60
Q

An insured should not profit from an insurance transaction. This describes which principle?

A

The principle of indemnity

61
Q

Are reciprocals restricted on the type of insurance than transcact?

A

no

62
Q

Who administires the TRIA?

A

The Dept of treasury

63
Q

The owner of an antique store leaves valuable breakable items on display while heavy construction is taking place, believing that any pieces that fall and break will be covered by insurance. This demonstrates which hazard?

A

Morale

64
Q

what is a syndicate?

A

underwriters

65
Q

What is the voluntary relinquishment of a right?

A

a waiver

66
Q

The predictability of loss improves when the number of similar units increase because of which principle?

A

Law of large numbers

Insurance License (4 decks)

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