Chapter 1 Heath/Life Insurance

Question 1

What is a Certificate of Authority?

Answer 1

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.

Question 2

What is Claims Department?

Answer 2

Responsible for Processing, Investigating and paying claims

Question 3

Divisible Surplus

Answer 3

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.

Question 4

Actuarial department

Answer 4

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

Question 5

Alien Insurer

Answer 5

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

Question 6

Admitted Insurer

Answer 6

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.

Question 7

Broker

Answer 7

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

Question 8

Captive Insurer

Answer 8

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

Question 9

Domestic Insurer

Answer 9

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

Question 10

Foreign Insurer:

Answer 10

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.

Question 11

Fraternal Benefit Society

Answer 11

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

Question 12

Industrial Insurer

Answer 12

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. Worker’s Comp.

Question 13

Insurance

Answer 13

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

Question 14

Insured

Answer 14

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

Question 15

Insurer

Answer 15

The insurer is the insurance company.

Question 16

Lloyds of London

Answer 16

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

Question 17

Multi-line Insurer

Answer 17

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.

Question 18

Mutual Insurance Company

Answer 18

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

Question 19

Non-admitted Insurer

Answer 19

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.

Question 20

Nonparticipating policy

Answer 20

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

Question 21

Participating Plan

Answer 21

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.

Question 22

Private (Commercial) Insurer

Answer 22

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.

Question 23

Reciprocal Insurer

Answer 23

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

Question 24

Reinsurance

Answer 24

Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself from the risk of a major claims event.

Question 25

Reinsurer

Answer 25

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.

Question 26

Risk Retention Group

Answer 26

is a type of liability insurance company that allows businesses with similar insurance needs to pool their risks and assume and spread some or all of the liability exposure of its members.

Question 27

Self-Insurers

Answer 27

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

Question 28

Stock Insurance Company

Answer 28

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.

Question 29

Surplus Lines Insurance

Answer 29

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.

Question 30

Underwriting Department

Answer 30

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

Question 31

Mutilation

Answer 31

The process of a stock company being converted into a mutual company

Question 32

De-Mutilation

Answer 32

The process of a mutual company being converted into a Stock Company

Question 33

pure assessment mutual company

Answer 33

operates on the basis of loss-sharing by group members.

Question 34

ceding company

Answer 34

The company transferring the risk is called the

Question 35

reinsurer

Answer 35

The company assuming the risk is the

Question 36

The marketing or sales Division

Answer 36

are responsible for increasing the number of prospective applicants.

Question 37

The sales department

Answer 37

typically the department completing the application.

Question 38

Agents are also classified as

Answer 38

captive or career agents and independent agents.

Question 39

Career agencies

Answer 39

are branches of major stock and mutual insurance companies that are contracted to represent an insurer in a specific area.

Question 40

Express authority

Answer 40

is the authority a principal deliberately gives to its agent.

Question 41

Implied authority

Answer 41

is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal.

Question 42

Apparent authority

Answer 42

is the appearance or assumption of authority based on the principal’s actions, words, or deeds.

Question 43

Rating Service

Answer 43

is an independent agency’s opinion about the company’s financial strength and ability to pay claims. These ratings are important because they help consumers decide if an insurer can be expected to pay claims.

Question 44

Reserves

Answer 44

The accounting measurement of the insurer’s future obligations to its policyholders.

Question 45

Liquidity

Answer 45

how easy it would be for you to access cash from your policy

Question 46

1945-The McCarran-Ferguson Act.

Answer 46

States that while the federal government has the authority to regulate the insurance industry, it would not exercise that right if the insurance industry was run effectively and adequately by the states.

Question 47

1970 Fair Credit Reporting Act

Answer 47

Provides individuals privacy protection and fair and accurate credit reporting