Chapter 3: Types of Insurers Flashcards
CLASSIFICATION BY LINE OF BUSINESS
i.e. life and health; property and liability; all lines
CLASSIFICATION BY DOMICILE
Domestic=doing business in state where incorporated
Foreign=doing business in state other than state incorp.
Alien=incorporated in another country
ADMITTED VS NONADMITTED
Admitted=licensed to do business in policyowners state
Nonadmitted=not licensed in policyowners state (can provide surplus lines of insurance)
CLASSIFIED BY FORM OF ORGANIZATION
Stock
Mutual
Other
STOCK INSURANCE COMPANY
Owned by stockholders; exchanged; profit driven
Premiums tend to be fixed
Residual profits can be paid to stockholders
MUTUAL INSURANCE COMPANY
Not for profit; owned by policyholders
Advanced-premium mutuals (resemble stock companies-pre-set premiums)
Assessment mutuals (Premiums determined by losses and expenses)
DEMUTUALIZATION
To raise capital quickly; diversify activities; allow payment of stock to executives and board members
MUTUAL HOLDING COMPANY
Mutual company creates holding company and holding company acquires majority stock of new stock insurance company
OTHER TYPES OF INSURING ORGS.
Fraternal=provide insurance to members only
Reciprocal=unincorporated; policyholders assume liability and grant attorney managing power
Captives=owned by organization it insures
Banks
BLUE CROSS & BLUE SHIELD
Prepay subscribers medical care benefits.
Cross=coverage for hospital expenses
Shield=coverage for physician services
LLOYD’S ASSOCIATIONS
Group of individual insurers; good for insuring unusual and difficult risks
MARKETING
Directing the flow of goods and services from the insurer to the consumer
AGENTS
Produces business for insurance company they represent
Defined powers
Binding power
BINDER
Temporary evidence of insurance until written policy is issued.
BROKERS
Legally represent the policyowner; independent contractor; may work with several companies
