Chapter 5 Vocab (Text)

Question 1

Stock Insurer

Answer 1

corporation owned by stockholders

Question 2

Mutual Insurer

Answer 2

corporation owned by the policyholders

Question 3

Advance Premium Mutual

Answer 3

owned by the policyholders; there are no stockholders, and the insurer does not issue acceptable policies.

Question 4

Assessment Mutual

Answer 4

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

Question 5

Fraternal Insurer

Answer 5

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

Question 6

Demutualization

Answer 6

means that a mutual insurer is converted into a stock insurer

Question 7

Holding Company

Answer 7

company that directly or indirectly controls an authorized insurer

Question 8

Lloyd’s of London

Answer 8

not an insurer, but the world’s leading insurance market that provides services and physical facilities for its members to write specialized lines of insurance

Question 9

Reciprocal Change

Answer 9

Also called an interinsurance exchange, can be defined as an unincorporated organization in which insurance is exchanged among the members (called subscribers)

Question 10

Captive Insurer

Answer 10

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

Question 11

Savings Bank life Insurance (SBLI)

Answer 11

life insurance that was sold originally by mutual savings banks in three states: Massachusetts, New York, and Connecticut

Question 12

Express Authority

Answer 12

refers to the specific powers that an agent receives from the insurer

Question 13

Implied Authority

Answer 13

the agent has the authority to perform all incidental acts necessary to exercise the powers that are expressly given

Question 14

Apparent Authority

Answer 14

the authority the public reasonably believes the agent possesses based on the actions of the principal

Question 15

Binder

Answer 15

temporary insurance until the policy is actually written

Question 16

Broker

Answer 16

Someone who legally represents the insured

Question 17

Nonadmitted insurer

Answer 17

insurer not licensed to do business in the state

Question 18

Surplus Lines Broker

Answer 18

a special type of broker who is licensed to place business with a nonadmitted insurer

Question 19

Personal Selling Distribution Systems

Answer 19

systems in which commissioned agents solicit and sell life insurance products to prospective insureds

Question 20

A Personal-Producing General Agent (PPGA)

Answer 20

independent agent who receives special financial consideration for meeting minimum sales requirements

Question 21

Direct Response System

Answer 21

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

Question 22

Exclusive Agency System

Answer 22

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

Question 23

Direct Writer

Answer 23

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

Question 24

Multiple Distribution Systems

Answer 24

To increase profits, many property and casualty insurers use more than one distribution system to sell insurance

Question 25

Mass Merchandising

Answer 25

plan for selling individually under written property and casualty coverages to group members