Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FL 220 License Exam > Chapter 1 - General Lines > Flashcards

Chapter 1 - General Lines Flashcards

1
Q

McCarran - Ferguson Act of 1945

A

Determined that the Federal government can not regulate insurance in areas over which states have the authority to do so. Government insurers step in when private insurers are unable to - catastrophe or unpredictability of risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What does the NAIC do?

A

Provides recommendations for state insurance regulators
Promotes uniformity among states
Has no legal authority to enact or enforce laws

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Who established the Federal Insurance Office?

A

Dodd-Frank Wall Street Reform and Consumer Protection Act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does the legislative branch do?

A

Writes and passes state insurance laws, or statutes, to protect the insuring public

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is judicial branch responsible for?

A

Interpreting and determining the constitutionality of the statutes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the role of the executive branch?

A

Enforce the existing statutes that have been put in place

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Stock Insurance Company

A

Owned by stock holders

Issue non-participating policies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Define Mutual Insurance Company

A

Owned by policyholders/members

Issue participating policies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Define Reciprocal Insurance Company

A

Group owned insurer whose main activity is risk sharing

Members are known as subscribers and assumes a part of the risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Define Lloyds of London

A

Not an Insurance Company
Consists of groups of underwriters called Syndicates
Example - insuring JLo’s legs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define Fraternal Benefit Societies

A

Non-profit basis

Social organizations that engage in charitable activities that provide life and health insurance to their members

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Define Risk Retention Groups

A

Group-owned that primarily assumes and spreads the liability risks of its members
Owned by policyholders
Ex - theme parks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Define Residual Markets

A

Private coverage of last resort for businesses and individuals who have been rejected by voluntary market insurers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What do Reinsurance Companies do?

A

Assume all or a portion of a risk from a primary or ceding (giving up) insurance company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the types of Reinsurance (2)? Define them.

A

Treaty Agreements

Facultative Agreements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Define Treaty Agreements (Reinsurance)

A

Reinsurance that covers all risks contained in the lines of business automatically

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Define Facultative Agreements (Reinsurance)

A

Reinsurance that allows ceding companies and reinsurance companies the opportunity to negotiate coverage for individual risks
+

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the purpose of Financial Rating Services?

A

Rating the financial stability of insurance companies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a domestic, foreign, alien insurer?

A

Domestic - Within the state
Foreign - another state or US territories
Alien - Outside of US and territories

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Admitted vs Non-admitted

A

Admitted - Authorized to do business in the state

Non-admitted (Unauthorized) - authorization was declined or they did not apply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What type of Insurance can Non-Admitted insurers provide?

A

Surplus and Excess lines when it cannot be obtained from admitted carriers

22
Q

What is the purpose of the Actuarial Department?

A

Gather information used in rates making. Sets premium rates.

23
Q

What is a direct writing system?

A

Where the Insurer owns the accounts and the agent is an employee for the insurer.

24
Q

What is a career agency system?

A

Agents are recruited by a General Agent who is contracted with the insurance company

25
Q

What is Personal Producing General Agent?

A

Does not have career agents and sells insurance for insurers it is contracted with

26
Q

What is the law of agency?

A

The agent or producer acts on behalf of the principal or insurer. The producer binds the actions of the insurer

27
Q

List out the three types of authority a producer has

A

Express
Implied
Apparent

28
Q

Define Express Authority

A

It is written. Ex - The producers binding authority if written in contract.

29
Q

Define Implied Authority

A

Authority the public assumes the producer has. Ex - agents provide quotes and accept premiums. It is assumed.

30
Q

Define Apparent Authority

A

When the Agent exceeds authority expressed (written) in the agency contract. Ex - accepting premium on a lapsed policy.

31
Q

What is a broker?

A

Negotiates insurance contracts with insurers on behalf of the applicant.

32
Q

What is a Producer (Agent)?

A

A person appointed by the insurance company to represent it and present policies on its behalf.

33
Q

What is the Fair Credit Reporting Act?

A

Protects consumer privacy and lets the applicant know they have a right to view their report and challenge it.
The Insurer is not responsible for correcting inaccuracies.

34
Q

What is the Financial Anti-Terrorism Act (Patriot Act)?

A

Forces these financial/non-financial institutions to record keep and report to the government specific financial transactions and customer financial records

35
Q

What is the Fraud and False Statements (Fraudulent Insurance Act)?

A

The NAIC in 2001 adopted legislation for the prevention and enforcement of insurance fraud. Each state enacted its own Fraudulent Insurance Act.

36
Q

What is the Merchant Marine Act of 1920 (the Jones Act)?

A

Allows insured seamen to make claims for injuries suffered during the course of employment since Workers Comp laws do not apply to seamen.

37
Q

What is the Motor Carrier Regulatory and Modernization Act (the Motor Carrier Act of 1980)?

A

It allows motor carriers to set their own rates and must have evidence of insurance, bonded, or self insured.
It deregulated the trucking industry by not allowing any entity to set rates for motor carriers.

38
Q

What is the Gramm-Leach Biley Act?

A

Allows banks, security companies, and insurance companies to merge (repealed parts of the Glass - Steagall Act).
Also established the Financial Privacy Rule and Safeguards Rule - in other words, companies are required to have a privacy notice and explain where their information is going or how it is being used and must give the option to the consumer to opt out.

39
Q

What is the Terrorism Risk Insurance Act and its Extensions of 2005 and 2007?

A

Created in response to 9/11. Temporary program that allows the federal government to share in terrorism losses with private insurers. Only applies to commercial and casualty. Personal, life, and health insurance is not covered.

40
Q

What is the Violent Crime Control and Law Enforcement Act of 1994?

A

The act makes it a felony to engage in the business of insurance after being convicted of a state or federal crime involving dishonesty or breach of trust.

41
Q

List the two types of risk?

A

Speculative Risk

Pure Risk

42
Q

Define Speculative Risk

A

Risk where there is a chance for loss, gain, or neither. Ex - Gambling

43
Q

Define Pure Risk

A

Risk where there is no change of gain

44
Q

List the three types of hazards

A

Physical, Moral, Morale

45
Q

Define a Physical Hazard

A

A physical condition that increases the risk. Ex - Flammable material stored near a furnace

46
Q

Define a Moral Hazard

A

Dishonest tendencies that increase risk Ex - Insured burns down their home to collect insurance payout

47
Q

Define a Morale Hazard

A

Attitude that increases risk. Ex - Carelessness of leaving your car unlocked.

48
Q

List the ways of managing risk?

A

STARR

Sharing - investing in insurance with other large groups
Transfer - transferring the risk from consumer to an insurance company (Nationwide).
Avoidance - eliminate the risk
Reduction - minimize the chance of loss
Retention - self insure or only insure risks that threaten financial stability.

49
Q

What is the law of large numbers?

A

As the units in a group increase, the more likely it is to predict a particular outcome

50
Q

What is the principle of indemnity?

A

Restoring the insured to the same financial or economic condition that existed prior to the loss. Insured should NOT profit.

51
Q

List the Underwriting Factors (4)

A

Nature of the risk
Hazards that are present
Claims History
Other factors that depend upon the type of risk being insured

FL 220 License Exam (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions