Chapter 1 Summary Flashcards
The transfer of risk from one party to another through a legal contract or the transfer of risk through the pooling (accumulation) of funds.
Insurance
The ________ ___ __________ is that most contracts offered to individuals and organizations in society, including health, property, and casualty policies, are contracs of indemnity whose primary purpose is to pay off financial losses and reimburse the insured.
benefit of insurance
Insurance evolved to produce a _____ ______ to economical undertainties and losses.
practical solution
Companies that sell more than one line of insurance are known as
multi-line insurers
_______ may or may not be policy holders.
stockholders
_________ creates an instant estate, regardless of when death occurs.
Life Insurance
typically issues nonparticipating policies
stock insurance company
Which policies do not allow policy holders to participate in board elections or dividends and instead aim to increase profit for the shareholders.
Nonparticipating
________ _______ are reffered to as _______ companies because the policyowners participate in dividends.
mutual companies participating
__________ policies allows policyholders to p________ in the company by electing the board of directors and receiving dividends from the divisible surplus.
participating participate
______ _______ ________ is the amount of earning paid to policyownders as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.
the divisible surplus
A ________ ________ _________ _________ operates on the basis of loss-sharing by group members.
pure assessment mutual company
A _____ _______ _______ or risk purchasing group only has to be licensed in one state but may insure members in any State.
risk retention group
______ ______ are organized on the basis of ownership by their policyholders.
reciprocal insurers
To be characterized as a ______ ______ ______, hte organization must be nonprofit, have alodge system that includes ritualistic work, and maintain a representative form of government with elected officers
fraternal benefit society
______ ______ ______ is not aninsurer but rather a syndicate of individuals and companies that individually underwrite insurance
Lloyd’s of London
The company transferring risk is called the _______ _______
ceding company
The company assuming the risk is the ______
reinsurer
In a reinsurance agreement, the insurance company that transfers its loss exposure to another insurer is called ______ ______
primary insurer
The most common reinsurance contract between two insurance companies is called ______ ______, which involves an utomatic sharing of the risks assumed
treaty reinsurance
An insurer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure is known as a ______ ______
captive insurer
_______ ______ refer to the nontraditional insurance market.
surplus lines
______ ______ is characterized by relatively small face amounts with premiums paid weekly.
industrial insurance
a ______-________ established a self-funded plan to cover potential losses
self-insurer
The ______ __ ______ divisions are responsible for increasing the number of prospective applicants
marketing or sales
The ______ ______ is typically the department completing the application.
sales department
the ______ ______ is responsible for reviewing applications, conducting investigations to gain addtitional information about applicants, assigning risk classifications, and approving or declining an application
underwriting department
The ______ ______ is responsible for processing, investigating, and paying claims for losses incurred by insureds.
claims department
The ______ _______ calculates policy rates, reserves, and dividends and makes other applicable statistical studies and repots focusing on morbidity and mortality tables
actuarial department
In any _______ between the insured or beneficiary and the insurer, the agent who solicits an insurance application represents the insurer and not the insured or beneficiary.
dispute
Agents are also classified as ______ or ______ and ______
captive career agents independent agents
This case, which the US Supreme Court decided, involved one state’s attempt to regulate an insurance company domiciled in another state.
1868-Paul v. Virginia
In the SEUA case, the Supreme Court ruled that the insurance industry is subject to a series of federal laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerc to be regulated by the federal government
1944-United states v. Southeastern Underwriters Association (SEUA)
This law made it clear that the states’ continued regulation of the insurance was in the public’s best interest. However, it also made possible the application of federal antitrust laws to the exten that (the insurance business) is not regulated by state law
1945-The McCarran-Ferguson Act
What year the Supreme Court held that the McCarran-Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further federal control, but none have been successful
1958-intervention by the FTC
The supreme Court held that federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulation. The ____ regulates variable life insurance
1959-intervention by the SEC
requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application.
1970-Fair Credit Reporting Act
it is a criminal offense for an individual who has been convited of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a “Letter of Written Consent To Engage in the Business of Insurance” from the regulating insurance department of the individual’s state of residence.
1994-united states code (usc) Sections 1033 and 1034.
In ____ Congress passed the ______ ______ ______ ___ , which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages, and insurance companies can now enter each other’s lines of business
1999-Financial Services Modernization Act
___ _____ ___, which Amend the Bank Secrecy Act (BSA), was adopted in response to the September 11,2001, terrorist attacks. ___ _____ ___ is intended to strengthen U.S. measures to prevent, detect, and tere terrorist and their funding. The act also aims to prosecute international money laundering and the financing of terrorist. These Efforts include anti-money laundering (AML) tools that impact the banking, finanical and investment communities
The Patriot Act
What does the Patriot Act Stand For?
Uniting and strengthening america by providing apporpriate tools requred to intercept and obstruct terrrorism
The Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarkters cannot make solicitation calls
2003- do not call implementation act.
Often shortened to the Affortable Care Act (ACA), it represents one of the most significan regulatory overhauls and expansions of health insurance coverage in US history.
2010-Patient Protection and affordable Care Act (PPACA)
An ______ is a person who acts for another person or entity known as the principal with regard to contractual arrangements with third partys
agent
the authority a principal deliberately gives to its agent
express authority
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
implied authority
the eppearance or assumption of authority based on the principal’s actions, words, or deeds.
apparent authority
in the insurance industry, a _____ ______ company’s primary purpose it to determine the financial strength of the industry’s insurers.
rating service
the accounting measurement of an insurer’s future obligations to its policyholders
reserves
______ indicates a company’s ability to make unpredictable payouts to policy owners
Liquidity
