Chapter 5 Vocab (Notes)

Question 1

Consolidation

Answer 1

means the number of firms has declined due to mergers and acquisitions

Question 2

Convergence

Answer 2

means that financial institutions now sell a wide variety of financial products that earlier were outside their core business area

Question 3

Stock Insurer

Answer 3

corporation owned by stockholders

Question 4

Advanced Premium Mutual

Answer 4

owned by the policyowners, there are no stockholders, and the insurer does not issue accessible policies

Question 5

Assessment Mutual

Answer 5

has the right to assess policyowners an additional amount if the insurer’s financial operations are unfavorable

Question 6

Fraternal Insurer

Answer 6

is a mutual insurer that provides life and health insurance to members of a social or religious organization

Question 7

Demutualization

Answer 7

whereby a mutual company is converted into a stock insurer by a pure conversion, merger, or bulk reinsurnace

Question 8

Holding Company

Answer 8

company that directly or indirectly controls an authorized insurer

Question 9

Blue Cross Blue Shield Plans

Answer 9

generally organized as nonprofit, community oriented plans

Question 10

Health Maintenance Organization (HMO)

Answer 10

provides a comprehensive health care to its members

Question 11

Captive Insurer

Answer 11

an insurer owned by a parent firm for the purposes of insuring the parent firm’s loss exposures

Question 12

Savings Bank Life Insurance

Answer 12

refers to life insurance that is sold by mutual savings banks, over the phone, and through websites

Question 13

Agent

Answer 13

someone who legally represents the principal and has the authority to act on the principal’s behalf

Question 14

Binder

Answer 14

provides temporary insurance until the policy is actuallly written

Question 15

Broker

Answer 15

someone who legally represents the insured and solicits applications and attempts to place coverage with an appropriate insurer, is paid a commission from the insurer’s where the business is placed, and does not have the authority to bind the insurer

Question 16

Surplus Line Broker

Answer 16

licensed to place business with a nonadmitted insurer

Question 17

Personal Selling Distribution Systems

Answer 17

commissioned agents solicit and sell life insurance products to prospective insureds

Question 18

Career or Affiliated Agents

Answer 18

full time agents who usually represent one insurer and are paid on a commission basis

Question 19

Multiple Line Exclusive Agency System

Answer 19

agents who sell primarily property and casualty insurance also sell individual life and health insurance products

Question 20

Independent Property and Casualty Agents

Answer 20

independent contractors who represent several insurers and sell primarily property and casualty insurance

Question 21

Personal Producing General Agent (PPGA)

Answer 21

an independent agent who places substantial amounts of business with one insurer and has special financial arrangement with that insurer

Question 22

Brokers

Answer 22

independent agents who do not have an exclusive contract iwth any single insurer

Question 23

Direct Response Ssytem

Answer 23

marketing system by which insurance products are sold directly to consumers without a face to face meeting with an agent

Question 24

Independent Agency

Answer 24

business firm that usually represents several unrelated insurers

Question 25

Exclusive Agency System

Answer 25

the agent represents only one insurer or group of insurers under common ownership

Question 26

Direct Writer

Answer 26

an insurer in which the salesperson is an employee of the insurer, not an independent contractor

Question 27

Direct Response

Answer 27

insurer sells directly to the consumer by television or some other media