Chapter 2 (principles & concepts) Flashcards
The insured must have an _________ in the person or property covered by an insurance policy.
insurable interest
The 3 elements of insurable risk are?
- Financial (a monetary interest);
- Blood (a relative); and
- Business (a business partner).
In property and casualty insurance, insurable interest must exist __________.
at the time of the loss
___________ is the process of reviewing applications for insurance and the information on the application. In other words, it is a risk selection process.
Underwriting
The underwriter’s ______________ refers to the operations of an insurance company where an employee, called an underwriter, is responsible for evaluating applications submitted to the insurer and determining whether a policy should be issued, and if so, the terms, conditions and rates for that policy.
function
In simple terms, an ________ is the amount charged for a particular amount of coverage.
insurance rate
The approach to setting rates is very similar in most instances, but it is possible to distinguish between two different types of rates: _______ and individual.
class
The term ________ (or manual rating) refers to the practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics
class rating
In some areas of risks, the characteristics of the units to be insured vary so widely that is deemed desirable to depart from the class approach and calculate rates on the basis that attempts to measure more precisely the loss-producing characteristics of the ________
individual
There are 5 basic individual rate-making approaches:
- Judgment rating;
- Schedule rating;
- Experience rating;
- Retrospective rating; and
- Merit rating.
____________ is used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class.
Judgment rating
In __________, the rates are developed by applying a schedule of charges and credits to some base rate to determine the appropriate rate for an individual exposure.
schedule rating
In ___________ , the insured’s own past loss experience enters into the determination of the final premium.
experience rating
__________ is a self-rating plan under which the actual losses during the policy period determine the final premium, subject to a minimum and maximum premium.
Retrospective rating
Another type of rating is ___________ is most commonly used in personal auto insurance. In this method of rating, the insured’s premium is based not on the actual loss record, but on other factors that indicate the probability that loss will occur.
merit rating
__________ is a rating method developed by ISO that provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and are based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time.
Loss costs
___________ are factors that determine rates including loss reserves, loss adjusting expenses, operating expenses, and profits.
Components
A _________ is a specific cause of loss. __________ insured against in standard property policies include fire, wind, hail, and explosions.
peril
__________ is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that lists specific covered perils.
Named peril
_________ is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded.
Open peril
The two types of property losses that an individual or a business may be exposed to are _______________
direct and indirect.
Property insurance only covers _______ losses. However, indirect losses are related to the direct loss, and insurance coverage to protect against these indirect losses often is added to property insurance policies. Direct losses mean direct physical damage to buildings and/or personal property.
direct
Direct loss also includes other damage where the insured peril was the ___________
proximate cause of loss.
Indirect losses, also known as _________ losses, are losses considered a result of direct loss.
consequential
___________ is the failure to use the care that a reasonable, prudent person would have under the same or similar circumstances.
Negligence
A _________ is a wrongful act or the violation of someone’s rights that leads to legal liability. ____________ is a person who commits a tort. Torts are classified as intentional or unintentional (referred to as negligence).
Tort, Tortfeasor
An _________ is any deliberate act that causes harm to another person regardless of whether the offending party intended to injure the aggrieved party.
intentional tort
An ___________ is the result of acting without proper care. This is generally referred to as negligence.
unintentional tort
Failure to behave in this manner constitutes negligence, and if this ___________ leads to injury to another or damage to property belonging to another, the negligent party may be held legally liable for the damage.
negligence
There are four primary elements considered in establishing negligence, and all four must be present in order to prove negligence on the part of another party:
