Chapter 1 - General Insurance Flashcards
Insurers (Insurance Companies or Carriers)
Provide insurance coverage by issuing particular insurance policies or contacts
Insurance Agencies
Are independent sales organizations that provide service and distribute insurance policies to consumers
Insurance Agents or Producers
Are licensed individuals representing an insurance company when transacting insurance business
Insured
Person or entity that has insurance protection under a policy for a covered loss
Insurance is regulated at what level and what branches
State level
Branches:
Legislative
Judicial
Executive
Legislative branch
Writes and passes state insurance laws, or status, designed to protect the insuring public
Judicial Branch
Interpreting and determining the constitutionality of the statutes
Executive Branch
Enforce the existing statutes that have been put in place
Commissioner, Director, or Superintendent- has power to issue rules and regulations
National Association of Insurance Commissioners (NAIC)
Regulatory support organization created and governed by the the chief insurance regulators and commissioners from the 50 states
Provides resources, research, legislative, and regulatory recommendations and interpretation for state insurance regulators
Members may accept or reject recommendations but have no legal authority to enact or enforce insurance laws
Primary goal= promote state uniformity
Stock Insurance Companies
Owned by stockholders
Traditionally insurers issue non-participating policies
Mutual Insurance Company
Owned by policyholders (members)
Policyholders
Considered the owners, but do not directly manage the company
Board of Directors is elected by the policyholders to manage the company
If declared by the board, policyholders may receive non-taxable dividends as a return of unused premium
Mutual insurers typically issue participating policies
Fraternal Isurers
Know as Fraternal Benefit Societies
Primary social organizations that engage in charitable and benevolent activities that provide primary life insurance to its members. Usually organized on a nonprofit basis
Membership is typically drawn from members of a given religious organization, lodge, order, or society
Domicile
Refers to location or jurisdiction ( state, district, territory, or country) where an insurer is formed or incorporated
3 types:
Domestic
Foreign
Alien
Domestic Insurer
Organized under law of state in which it is placing business in that particular state
Can only be domestic to the state it is incorporated
Ex. Organized in TX is domestic in TX
Foreign Insurer
Business anywhere within the US other than the state it was organized and incorporated
Ex. Incorporated in NY is foreign in TX
Alien Insurer
Placing business within the US which was organized under the laws of anther country
Ex. Incorporated in Canada is considered alien to TX
Admitted/Authorized Insurer
Approved to transact insurance in a given state if it has been granted a CERTIFICATE OF AUTHORITY from that states department of insurance
Non-admitted/Unauthorized
Not authorized to transact insurance in a given state, either by failing to comply with state requirements or not seeking admission
Fair Credit Reporting Act
Protects the consumers right to privacy of credit and financial information
Credit reports may be obtained only to determine the financial and moral status of an applicant
US Patriot Act and Anti- Money Laundering (AMIL)
Passed to detect and prevent laundry money
Financial institutions and insurance companies are required to provide (AML) training since insurance products are now being used to give legitimate appearance to money financed by illegal activities
Insurance Contract
Insurance policy is a legal contract between 2 parties
Principle of Indemnity
Indemnify- Compensation for a loss or to make whole again
Insurance is designed to restore an insured to the same physical or financial condition which existed prior to the loss (without a profit or gain)
Elements of Legal Contract
Competent Parties
Legal Purpose
Agreement (Offer and Acceptance)
Consideration
