Chapter 8: Insurance Functions Flashcards

1
Q

Agent

A

Person authorized to act for another person

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2
Q

Principle

A

person whose agent acts behalf of

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3
Q

Agency Contract

A

Agent and insurance company, establish rights and duties for each party, agent has authority

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4
Q

Express Authority

A

Written appointment of agent

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5
Q

Incidental Authority

A

Agents does what is normally required to accomplish specified acts

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6
Q

Binding Authority

A

agents creates valid & binding insurance contract on behalf of insurer

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7
Q

What is a Brokerage

A

legal representative of insurance consumer with limited authority to find insurance company for their clients.

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8
Q

Direct Writing Insurers

A

Use agents who represent only one insurer, contribution received in commission

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9
Q

Independent Agents

A

contractors who represent multiple different insurers, legal right to renew clients, increase commission fee

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10
Q

Life Agent

A

Motivate people to buy life insurance and apply for coverage, ‘professional financial planners”

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11
Q

What do Brokers do?

A

evaluate market and find insurance for clients, deal with multiple insurers

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12
Q

Direct Marketing

A

mail, telephone, solicitation

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13
Q

E-Commerce

A

internet, cut costs & direct contracts

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14
Q

Loss adjustors (Dad’s firebird)

A
  • after loss notified there is a claim investigation
  • loss extent not always clear, full or partial
  • no agreement then arbitration or appraisal
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15
Q

Independent Adjustor

A

Agent of insurer, resides near accident location to evaluate

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16
Q

Public Adjustor

A

Agent of insured -> hired to gain further estimate or settlement

17
Q

Underwriter

A

price insurance rates and premiums through models with built in assumptions, review applications for insurance and accepts or applies rates based on criteria

18
Q

Actuaries

A

Use mathematical and statistic thinking to solve problems, forecast risk, financial losses through models, prior data and trend patterns, make future projections, develop rates

19
Q

Attorneys

A

represent insurance companies interest in lawsuits against insureds, develop wording of insurance

20
Q

Financial managers

A

prepare budgets, coordinate cash in/outflow

21
Q

Loss reserves

A

estimated future liability of claims owed to policyholders

22
Q

Reinsurance

A

insurance company obtains insurance from another to protect itself from whole loss

23
Q

Primary Insurer

A

sells insurance to policyholder

24
Q

Reinsurer

A

primary insurer obtains reinsurance

25
Facultative Reinsurance
primary insurer makes separate agreement each time it needs reinsurance by entering market and negotiating
26
Treaty Reinsurance
relationship between primary and reinsurer, portfolio of primary insurer is covered by reinsurance, must cease business/operation during treaty
27
Pro Rata reinsurance
Primary and reinsurer cover losses, premiums, expense proportionately
28
Excess of loss reinsurance
Reinsurer covers losses and pays only when loss amount exceeds limit set by primary insurer
29
Catastrophe Reinsurance
high retention limits for primary carrier before catastrophe reinsurer becomes liable
30
Reason to purchase reinsurance (3)
keep exposure in smaller size smaller primary insurers can enter the market and use expertise of large insurer reduce size of potential loss, accept larger exposure
31
Retrocession
Reinsurer purchases reinsurance
32
Who purchases insurance from the first reinsurer? 2-names for it
Primary Reinsurer or Ceding Reinsurer