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NY Life Insurance Agent Broker > Chapters 2-6 > Flashcards

Chapters 2-6 Flashcards

1
Q

Agent/Producer

A

A legal representative of an insurance company. The classification of producer usually includes agents and brokers. Agents are the agents of the insurer

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2
Q

Applicant or the proposed insured

A

A person applying for insurance

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3
Q

Beneficiary

A

A person who receives benefits of an insurance policy

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4
Q

Broker

A

An insurance producer not appointed by an insurer and is deemed to represent the client.

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5
Q

Indemnity

A

Main principle of insurance meaning that the insurer cannot recover more than their loss; the purpose of insurance is to restore the insured to the same position as before the loss.

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6
Q

Insurance policy

A

A contract between a policy owner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for the loss caused by specific events

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7
Q

Insured

A

The person covered by the insurance policy. This person may or may not be the policy owner

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8
Q

Insurer (principal)

A

The company who issues an insurance policy

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9
Q

Law of large numbers

A

The larger the number of people with a similar exposure to loss the more predictable actual losses will be

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10
Q

Policyowner

A

The person entitled to exercise the rights and privileges in the policy

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11
Q

Premium

A

The money paid to the insurance company for the insurance policy

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12
Q

Reciprocity/Reciprocal

A

A mutual interchange of rights and privileges.

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13
Q

Insurance

A
  • Transfers the risk of loss from an individual to an insurer
  • Based on the principle of indemnity
  • Based on the spreading of risk (risk pooling) and the law of large numbers
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14
Q

Hazards

A

Conditions that increase the probability of loss occurring

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15
Q

Physical Hazard

A

A physical condition

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16
Q

Moral Hazard

A

a tendency toward increased risk

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17
Q

Morale Hazard

A

an indifference to loss

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18
Q

Risk

A

Uncertainty regarding financial loss

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19
Q

Pure Risk

A

insurable because it involves a chance of loss only

20
Q

Speculative Risk

A

not insurable because it involves a chance of gain

21
Q

Methods of handling risk

A
  • Avoidance
  • Retention
  • Sharing
  • Reduction
  • Transfer
22
Q

Insurance risk due to chance

A

chance of loss beyond insured’s control

23
Q

Insurance risk that is definite and measurable

A

loss must have definite time, place and amount

24
Q

Predictable insurance risk

A

number of losses must be statistically predictable

25
Q

Insurance risk that is not catastrophic

A

there must be limits that the loss can’t exceed

26
Q

Insurance risk large exposure

A

insurer must be able to predict losses based on the law of large numbers

27
Q

Randomly selected exposure insurance risk

A

insurer must have a fair proportion of both good and poor risks

28
Q

Stock Insurer

A
  • Owned by stockholders
  • Issue nonparticipating policies (nonpar)
29
Q

Mutual insurer

A
  • Owned by policyowners (policyholders)
  • Issue participating policies (par)
  • Pay dividends to policyholders which are a refund of excess premiums
30
Q

Fraternal benefit society

A
  • Not for profit organization
  • Not an insurer
  • Formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization
31
Q

Express authority

A

Powers specifically stated in the contract

32
Q

Implied authority

A

Not specifically stated in the contract, but is assumed necessary to conduct insurance business

33
Q

Apparent authority

A

The appearance of a relationship between the agent and principal based on words or actions

34
Q

Domicile

A
  • Domestic - incorporated in this state
  • Foreign - incorporated in another state of territory
  • Alien - incorporated in another country
35
Q

Authorized/Admitted

A
  • Approved by the Department of Insurance
  • Has a Certificate of Authority
36
Q

Unauthorized/nonadmitted

A

-No Certificate of Authority
-Cannot transact business in this state

37
Q

Elements of a legal contract

A

Agreement: offer and acceptance
Consideration: premiums and representations on the part of the insured; payment of claims on the part of the insurer
Competent parties: of legal age, sound mental capacity, and not under the influence of drugs or alcohol
Legal purpose: not against public policy

38
Q

Contract characteristics

A

Adhesion - one party prepares the contract; the other party must accept it as is
Aleatory - exchange of unequal amounts
Conditional - certain conditions must be met
Personal - between the policyowner and the insurance company
Unilateral - only one of the parties to the contract is legally bound to do anything

39
Q

Legal interpretations

A

Ambiguities in the contract are always resolved in favor of the insured
The insured can reasonably expect coverage based on the agent’s words and actions
Utmost good faith - parties rely on each other for information
Material misrepresentations (if intentional), breach of warranties, concealment, fraud - all can void the contract
Waiver - voluntary act of relinquishing a legal right; estoppel - consequence of a waiver

40
Q

Retention usually results from three basic desires of the insured

A

to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.

41
Q

What is also called “perceived authority?

A

Apparent authority

42
Q

Adverse selection

A

there are more risks with higher probability of loss seeking to purchase and maintain insurance than the risks who present lower probability. Underwriters must guard against this.

43
Q

fiduciary capacity

A

An agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.

44
Q

unilateral contract

A

the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.

45
Q

Is reinsurance a marketing system?

A

No, Reinsurance is a method used by insurers to protect against catastrophic losses

NY Life Insurance Agent Broker (1 decks)

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