Chapter 5: Types of Insurers and Marketing Systems Flashcards
What are the main components of the financial services industry?
- Commercial banks
- Savings and loan institutions
- Credit unions
- Life and health insurers
- Property and casualty insurers
- Mutual Funds
- Securities brokers and dealers
- Private and state pension funds
- Government-related financial institutions
- Finance companies and other financial firms
What are the types of private insurers classified by their organizational form?
- Stock insurers
- Mutual insurers
- Lloyd’s
- Reciprocal exchanges
- Blue Cross and Blue Shield Plans
- Managed care plans
- Captive insurance companies
- Other types of private insurers
Define a stock insurer. What is objectivee?
A corporation owned by stockholders aiming to earn profit for them.
earn profit for stockholders by increasing the value of stock and paying dividends
Who elects the board of directors in a stock insurer?
Stockholders
What are the three main types of mutual insurers?
Advance premium mutual: owned by the policyowners; there are no stockholders, and the insurer does not issue assessable policie
Assessment mutual: right to assess policyowners an additional amount if the insurer’s financial operations are unfavorable
Fraternal insurer: a mutual insurer that provides life and health insurance to members of a social or religious organization
What is a mutual insurer?
a corporation owned by the policy owners (if u buy policy u are owner)
The corporate structure of mutual insurers is changing due to: (if time permit)
- An increase in company mergers
- Demutualization, whereby a mutual company is converted into a stock insurer
- The creation of mutual holding companies
A holding company is a company that directly or indirectly controls an authorized insurer
What is Lloyd’s known for?
It is the world’s leading insurance market providing services for members to write specialized lines of insurance.
What is a reciprocal exchange?
An unincorporated organization where insurance is exchanged among members.
What are Blue Cross and Blue Shield Plans typically organized as?
Nonprofit, community-oriented plans.
What are managed care plans?
In addition to financing healthcare, the plan is involved in making healthcare decisions
* There is a focus on controlling costs
* It facilitates case management
HMO , POS, PPO
Health maintenance organization (HMO)
vs
Point of service plan (POS)
vs
Preferred provider organization (PPO)
HMO : lower premium/flexibility (in network + PCP for referal)
POS: Mid premium/flexibilit (in/out network w refer, PCP required)
PPO: high premium/flex (in/out network, no PCP or refer)
What is a captive insurer?
An insurer owned by a parent firm to insure the parent firm’s loss exposures.
Define an agent in the insurance context.
Someone who legally represents the principal and has the authority to act on the principal’s behalf.
What authority types may an agent have?
- Expressed
- Implied
- Apparent
True or False: A property and casualty agent has the power to bind the insurer.
True
What is the role of a broker in insurance?
Someone who legally represents the insured and attempts to place coverage with an appropriate insurer.
What is a surplus lines broker?
A broker licensed to place business with a non-admitted insurer.
What is a managing general agent (MGA)?
A specialized type of wholesale producer with underwriting authority from an insurer.
What are the two main types of insurance distribution systems?
- Personal selling distribution systems
- Direct response systems
What is a personal-producing general agent (PPGA)?
An independent agent who places substantial amounts of business with one insurer.
What is the primary characteristic of an independent agency?
It usually represents several unrelated insurers.
What defines a direct writer?
An insurer where the salesperson is an employee, not an independent contractor.
What is mass merchandising in the context of insurance?
A plan where property and casualty insurers employ mass marketing strategies.
