Chapter 5 - Types of Insurers Flashcards
Define Advance Premium Mutual
Mutual insurance company owned by the policyholders that does not issues assessable policies but charges premiums expected to be sufficient to pay all claims and expenses
Define Agent
Someone who legally represents the insurer, has the authority to act on the insurer’s behalf, and can bind the insurer (principal) by expressed authority, by implied authority, and by apparent authority. The principal is legally responsible for all acts of an agent when the agent is acting within the scope of authority.
Define Assessment Mutual
Mutual insurance company that has the right to assess policyholders for losses and expenses.
Define Broker
Someone who legally represents the insured, soliciting or accepting applications for insurance that are not in force until the company accepts the business. They are paid a commission from the insurers where the business is placed.
Define Captive Agent
A term to describe agents who represent only one insurer or a group of insurers that are financially interrelated or under common ownership.
Define Captive Insurer
Insurance company established and owned by a parent firm in order to insure its loss exposures while reducing premium costs, providing easier access to a reinsurer, and perhaps easing tax burdens
- A single parent, or pure, captive ins an insurer owned by one parent
- An association captive is owned by several parents.
Define Demutualization
A term to describe the conversion of a mutual insurer into a stock insurer.
Define Direct Response System
A marketing method where insurance is sold without the services of an agent. Potential customers are solicited by advertising in the mails, newspapers, magazines, television, radio, and other media.
Define Direct Writer
Insurance company in which the salesperson is an employee of the insurer, not an independent contractor, and which pays all selling expenses, including salary. In property and casualty insurance, the term ‘direct writer’ is also sued to describe insurers that use the exclusive agency system. Usually compensated on a “salary plus” arrangement
Define Exclusive Agency System
Type of insurance marketing system under which the agent represents only one company or group of companies under common ownership. In the property and casualty industry, insurers that use this marketing system are also called “direct writers”.
- Agents do not usually own the expiration or renewal rights to the policies
- Agents are generally paid a lower commission rate on renewal business than on new business
- Exclusive agency insurers provide strong support services to new agents.
Define Fraternal Insurer
Medical insurance company that provides life and health insurance to members of a religious faith, ethnic group, or social organization.
Define Holding Company
A company that directly or indirectly controls an authorized insurer
Define Independent Agency System
.Type of property and casualty insurance marketing system, sometimes called the American agency system, in which the agent is an independent businessperson representing several insurers.
- The agency owns the expiration or renewal rights to the business; it may bill the policyholders and collect premiums, but most insurers use direct billing.
- The agent is compensated by commissions based on the amount of business produced, that vary by line of insurance.
- Agent may be authorized to adjust smaller claims and may provide loss control services to their insureds.
Define Lloyd’s of London
World’s leading insurance makret the provides the services and physical facilities for its members to write specialized lines of insurance. Its a market where members join together to form syndicates to insurance and pool risk.
Define Mass Merchandising
.Plan for insuring individual members of a group, such as employees of firms or members of labor unions, under a single program of insurance at reduced premiums. Property and liability insurance is sold to individual members using group insurance marketing methods.
Define Multiple Distribution Systems
Insurance marketing method that refers to the use of several distribution systems by an insurer; for example, a property and casualty insurer may use the independent agency method and direct response method to sell insurance.
Define Multiple Line Exclusive Agency System
Under this marketing system, agent who sell primarily property and casualty insurance also sell individual and life and health insurance products. The agent represent only one insurer or group of insurers that are financially interrelated or under common ownership. The agents are also called captive agents.
Define Mutual Insurer
Insurance corporation owned by the policyholders, who elect the board of directors. The board appoints managing executives, and the company may pay a dividend or give a rate reduction in advance to insureds.
Define Nonadmitted Insurer
An insurer not admitted to do business in the state.
