Chapter 1: Basic Principles of Insurance Flashcards

1
Q

What is an Actuarial department?

A

The actuarial department calculates policy rates, reserves, and dividends.

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2
Q

What is an Alien Insurer?

A

An Alien Insurer in the United States is an insurer whose principal office and domiciled location is outside the country.

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3
Q

What is an Admitted Insurer:

A

An admitted or authorized 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.

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4
Q

What is a Broker?

A

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

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5
Q

What is a Captive Insurer?

A

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

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6
Q

What is a Certificate of Authority?

A

A Certificate of Authority is 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.

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7
Q

What is a Claims Department?

A

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

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8
Q

What is a Divisible Surplus?

A

Divisible surplus is 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.

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9
Q

What is a Domestic Insurer?

A

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

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10
Q

What is a Foreign Insurer?

A

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.

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11
Q

What is a Fraternal Benefit Society?

A

Fraternal Benefit Societies are nonprofit benevolent organizations that provide insurance to its members.

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12
Q

What is a Industrial Insurer?

A

Industrial Insurers 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.

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13
Q

What is Insurance?

A

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

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14
Q

What is a Insured?

A

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

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15
Q

What is a Insurer?

A

The insurer is the insurance company.

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16
Q

What is Lloyds of London?

A

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

17
Q

What is a Multi-line Insurer?

A

A multi-line insurer is 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.

18
Q

What is Mutual Insurance Company?

A

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

19
Q

What is a Non-admitted Insurer?

A

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.

20
Q

What is a Nonparticipating policy?

A

A nonparticipating insurance policy, typically issued by stock companies, do not allow policyowners to participate in dividends or electing the board of directors.

21
Q

What is a Participating Plan?

A

A 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.

22
Q

What is a Private (Commercial) Insurer?

A

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

23
Q

What is a Reciprocal Insurer?

A

A Reciprocal Insurer is an unincorporated organization in which all members insure one another.

24
Q

What is Reinsurance?

A

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.

25
Q

What is a Reinsurer?

A

A reinsurer is 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.

26
Q

What is a Risk Retention Group?

A

A Risk Retention Group is a group-owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among its members.

27
Q

What are Self-Insurers?

A

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

28
Q

What is Stock Insurance Company?

A

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 issuance of guaranteed, fixed premium, nonparticipating policies.

29
Q

What is Surplus Lines Insurance?

A

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

30
Q

What is an Underwriting Department?

A

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