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General Level 1 Licensing > Course Introduction > Flashcards

Course Introduction Flashcards

1
Q

all segments of the insurance industry are subject to

A

government regulation

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2
Q

insurance is a ___________ matter

A

provincial

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3
Q

regulation of agents and brokers is addressed by the

A

Insurance Act in each province

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4
Q

what are most of the administrative functions of insurance in Alberta delegated to?

A

Alberta Insurance Council (AIC)

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5
Q

the AIC is a regulatory body responsible for:

A

licensing of brokers and agents, complaint handling, discipline of brokers and agents, developing by laws regulating conduct and practices of brokers/agents

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6
Q

blank

A

blank

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7
Q

what 5 things are basis for termination of a brokers license?

A

1) guilty of misrepresentation, fraud, deceit or dishonesty
2) contravenes any provision of the Insurance Act (ie: rebating)
3) fails to pay an insurer premiums collected beyond the term stipulated in an Agency Agreement
4) places insurance with unlicensed insurers (in a province)
5) proves to be incompetent or untrustworthy to transact insurance business for which a license has been granted

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8
Q

what does misrepresentation mean?

A

lying to an insurance company

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9
Q

what does fraud mean?

A

lying on a claims form

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10
Q

what is rebating?

A

giving some of your $ back to someone else that is not licensed

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11
Q

why dont underwriters need to be licensed

A

they dont deal with the public

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12
Q

sum up the confidentiality aspect of the Code of Conduct…

A

agents and brokers shall hold in strict confidence all information acquired in the course of the professional relationship concerning the business and affairs of a client

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13
Q

under the confidentiality sector of the Code of Conduct, agents and brokers shall not divulge any such information UNLESS…

A

1) authorized by the client
2) required by law to do so
3) must do so in conducting negotiations on behalf of a client

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14
Q

describe the fee disclosure section of the Code of Conduct?

A

-agents or brokers shall not stipulate, charge or accept any fee that is not fully disclosed, OR
-the basis for which is not fully disclosed prior to the service being rendered, OR
-which is so disproportionate to the service provided as to be unconscionable

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15
Q

What is Black’s Law Dictionary?

A

a dictionary of insurance terms that the judicial system uses, contains terms and phrases of American and English Jurisprudence

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16
Q

what are the 5 functions of insurance?

A

1) spread the risk (losses of the few are shared among the many, provincial pot of money)
2) basis of credit system
3) eliminates worry
4) loss prevention & loss reduction (clients mitigate)
5) source of employment and investment capital

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17
Q

what is investment capital?

A

what insurance companies invest in, must be LIQUID in case of catastrophic loss need that money ASAP

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18
Q

what is insurance?

A

the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of insurance may be exposed or to pay a sum of money or other thing of value upon the happening of a certain event (fr: Insurance Act)

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19
Q

what does it mean to indemnify?

A

to compensate for damage or loss sustained or expenses incurred

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20
Q

what is the principle of indemnity?

A

an insurance principle which aims at ensuring the victim of a loss receives the Actual Cash Value of the property

21
Q

what is Actual Cash Value?

A

ACV = replacement cost - depreciation

22
Q

indemnity is…

A

to put the insured back in exactly the same financial position as they were in immediately before the loss

23
Q

what is Lloyd’s of London?

A

a marketplace for higher risk property and liability risks, accessed by brokers in Canada

24
Q

what is different about Lloyd’s of London?

A

it is NOT an insurance company, but an insurance market of members. have to be subscribed.

25
Q

does Lloyd’s of London write business?

A

no, simply furnishes a place to:
-do business and discuss issues
-establish standard forms of policies
-arbitrate disputes
-set rules of conduct and operational procedures

26
Q

how did individual investors originally back policies written at Lloyds?

A

with all of their personal wealth

27
Q

what does Lloyds tend to underwrite?

A

very specific liability exposures, ex: Air Canada, ferries

28
Q

what is true about underwriters at Lloyds of London?

A

very specifically trained and only deal with that specific area that they are knowledgeable

29
Q

what is an important feature of the Lloyd’s system?

A

individual liability (when brokers place their clients’ risks at Lloyds, they do so not with the corporation, but with one or more of the syndicates)

30
Q

each member of a syndicate is directly liable to….

A

policyholders for their share of any losses that may fall on any policies on which the number of the syndicate appears

31
Q

Lloyds is made up of individual investors known as _______ who are then grouped into a ________

A

members, syndicate

32
Q

what is a reinsurer?

A

an insurance company’s insurer

33
Q

what is reinsurance?

A

an extension of the concept of insurance in that it passes on part of the risk for which the original insurer is liable

34
Q

who is a contract of re-insurance between?

A

the insurer and the reinsurer only. legally there is no direct link between the original insured and any re-insurer. this type of contact is called “treaty reinsurance”

35
Q

who is the original insurer?

A

the one who must pay any claim from the insured, the insurer must then make its own separate claim against the re-insurer

36
Q

what are the most common types of reinsurance contracts?

A

surplus, excess, facultative, treaty

37
Q

what is a surplus reinsurance contract

A

reinsurance of a portion of a risk or risks

38
Q

what is an excess reinsurance contract

A

reinsurance arrangement to cover losses over a specified amount

39
Q

what is a facultative reinsurance contract

A

reinsurance arranged on a case by case basis

40
Q

why is reinsurance important?

A

1) to protect against catastrophic claims (insurers spread the risk by re-insuring part of what they have agreed to insure with other re-insurers)
2) to obtain international spread of risk (important when a country is vulnerable to natural disasters and an insurer is heavily committed in any particular country)
3) to avoid undue fluctuation in underwriting results
4) to increase the capacity of the direct insurer (sometimes insurers want to insure a risk but are not able to do so on their own, by using reinsurance the insurer is able to accept risk)

41
Q

what are the most common types of private insurers in Canada?

A

-stock companies
-mutual companies

42
Q

what are stock companies?

A

ownership by shareholders whose purpose is to derive a profit from their investment

43
Q

what are mutual companies?

A

ownership by policyholders, any profits earned are shared with policy holders via a dividend.

44
Q

describe a direct writing system and give an example?

A

-producers are employees of insurer
-limited to selling only that company’s products
-insurer owns all business written and performs all administrative functions
examples: TD, AllState

45
Q

describe an independent agency/brokerage system and give an example?

A

-may represent many insurance companies
-brokerage owns the business, represents the client to the insurer
-brokerage is paid a commission from the insurer for business written
-binding authority is laid out in Agency/Broker agreement

46
Q

who’s job is it to administer the Insurance Act?

A

superintendent of insurance

47
Q

where does the Alberta Insurance Council derive its authority from?

A

the minister of finance

48
Q

the definition of insurance reveals 5 points:

A

1) a means of “shifting” financial responsibility from one to another
2) payment made only in event of a happening of a certain peril
3) amount of payment restricted to amount required to indemnify the insured
4) insurance covers losses which are accidental and occur in the future, NOT deliberate acts which have already occured
5)indemnity may be in form of a sum of money or other thing of value (repair vs cash settlement)

49
Q

lloyds of london is now the world’s leading market for…..

A

specialist insurance

General Level 1 Licensing (23 decks)

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