Chapter 1 Basic Principles Flashcards
Actuarial department
The actuarial department calculates policy rates, reserves, and dividends.
Alien Insurer
An Alien Insurer in the United States is an insurer whose principal office and domiciled location is outside the country.
Admitted Insurer
is an insurer who has received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state.
Broker
A Broker represents themselves and the insured (i.e., the client or customer).
Captive Insurer
issuer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.
Certificate of Authority
a license issued to an insurer by a department of insurance (or equivalent state agency), which authorizes that company to conduct insurance business in that particular state.
Claims Department
is responsible for processing, investigating, and paying claims.
Divisible Surplus
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.
Domestic Insurer
an insurer with its principal or home office in a state where it is authorized.
Foreign Insurer
an insurer with its principal office or domicile location in a state different from the state it is transacting insurance business.
Fraternal Benefit Society
are nonprofit benevolent organizations that provide insurance to its members.
Industrial Insurer
make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insurers include home service or debit insurers.
Insurance
he transfer of risk through the pooling or accumulation of funds.
Insured
the customer receiving insurance protection under an insurance policy.
Insurer
The insurer is the insurance company.
Lloyds of London
Lloyds of London is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance.
Multi-line Insurer
an insurance company or independent agent that provides a one-stop-shop for businesses or individuals 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.
Mutual Insurance Company
are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.
Non-admitted Insurer
A non-admitted or unauthorized insurer is an insurer who has not received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state.
Nonparticipating policy
typically issued by stock companies, do not allow policyowners to participate in dividends or electing the board of directors.
Participating Plan
is an insurance policy under which the policyowners share in the company’s earnings through receipt of dividends and also elect the company’s board of directors.
Private (Commercial) Insurer
are companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned.
Reciprocal Insurer
is an unincorporated organization in which all members insure one another.
Reinsurance
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.
Reinsurer
a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.
Risk Retention Group
a group-owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among its members.
Self-Insurers
establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company.
Stock Insurance Company
owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.
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.
Underwriting Department
is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications.
