CPCU 520 ch 1 - review notes Flashcards
Property Casualty Insurance Classifications
Legal form of ownership
Place of incorporation
Licensing status
Insurance distribution systems and channels
Proprietary insurers
Stock insurers, Lloyds, insurance exchanges
Most prevalent type of proprietary insurer in US=stock insurers
Formed for purpose of earning profit for its owners
Cooperative insurers
Owned by policyholders, formed to provide ins protection to policyholders at minimum cost
Cooperative insurer types
Mutal Insurers (largest), reciprocal insurance exchanges, fraternal organizations, other cooperatives
Attorney in fact
manager of reciprocal exchange
Captive insurer/formalized self insurance purpose
Fund the losses of their owners
Cooperative insurers
Captive insurers, risk retention groups, purchasing groups
Only unincorporated insurers permitted in most states
Reciprocal insurance exchanges
Distribution systems used by most insureres
Independent agency/brokerage marketing
Direct writer
Exclusive agency
Common distribution channels
Internet call centers direct response group marketing financial institutions
Five major goals of insurers
Earn a profit Meet customer needs Comply w/ legal requirements Diversify risk Fulfill duty to society
Internal constraints in achieving insurer’s major goals
Efficiency Expertise Size Financial resources Other--lack of name recognition/poor reputation
External constraints in achieving insurer’s major goals
Regulation Rating agencies Public opinion Competition Economic conditions Insurance marketing/distribution Other - catastrophes/disregard for law & order/legal changes affecting liability claims
Rating agencies
AM Best, Standard & Poor’s, Moody’s
measures of insurer profitability based on premium consider:
Premium growth issues and the rate of growth sustained over time
Ratios used to measure insurer’s underwriting performance
Loss ratio, expense ratio, combined ratio (trade basis)
Specific measures of insurer’s operational performance
Investment income ratio, overall operating ratio, return on equity
Measures of customer satisfaction
retention ratio (policy count, premium volume, both) lapse ratio (number of policies lapsed/number of policies written @ beginning of period
Core functions of typical insurer
Marketing/distribution
Underwriting
Claims
Supporting functions of typical insurer
Risk control Premium auditing Actualrial reinsurance Information technology
Other common functional areas of typical insurer
Investments Accounting/finance Customer service Legal/compliance HR Special investigation unit
Reciprocal exchange (interinsurance exchange)
Owned by policyholders, unincorporated assoc, purpose of providing insurance to members/subscribers and managed by attorney in fact. Members share profits in same amounts of insurance purchased
FAIR plans
Pool through which private insurers address need for prop insurance on urban proprties, esp those susceptible to loss by riot/civil commotion
Residual market
Make insurance available thru shared risk to thsoe who cannot obtain covg in admitted mkt
