Exam 1 Part B

Question 1

Self Contained Policy

Answer 1

”- Single, stand alone document

• Appropriate for insuring similar loss exposures
• Ex: Personal Auto, Life Insurance”

Question 2

Modular Policy

Answer 2

”- Mix and match set of components

• Designed around one basic policy component
• Looks like one policy but is not
• Ex: Property Policy - add crime”

Question 3

Standard Insurance Form

Answer 3

”- Pre Printed Form

• Developed by an insurance service or advisory organization
• ISO is most well known”

Question 4

Manuscript Policy

Answer 4

”- Custom Contract

• Very Specialized for specific risks
• Generally a one of a kind policy”

Question 5

Endorsements

Answer 5

”- Used to modify a more basic policy

• Takes precedence over any conflicting terms in the policy attached
• Hand written endorsement supercede printed one”

Question 6

Endorsements Benefits

Answer 6

”- Generates more revenue

• Saves time and money
• Insured pays premium”

Question 7

Exclusions

Answer 7

”- Clarifies what the insurer will cover
- Specifies what is not covered
“

Question 8

Why exclusions?

Answer 8

”- Eliminate Coverages for uninsurable losses
- Manage Moral/Morale Hazard
- Reduce Duplicate Coverage
- Eliminate coverage that typical insured would have no need
- Keep premium reasonable
“

Question 9

How do exclusions manage Moral/Morale Hazards?

Answer 9

”- Intentional acts
- Cover only certain items if you take certain care
- Penalize carelessness
“

Question 10

Example of How do exclusions reduce duplicate coverage?

Answer 10

Personal liability policies exclude business losses

Question 11

How do exclusions keep premiums reasonable?

Answer 11

If everything was covered it would be unnaffordable for the average consumer

Question 12

Steps to determine if a loss will be covered?

Answer 12

”- Valid contract exists?

• Full premium paid
• Fraud
• Misrepresentation”

Question 13

After Loss Analysis Questions

Answer 13

“1) What is payable?

2) Insured party participate?
3) Occurrence date - When? Where?
4) Post loss duties honored? Participate? Cooperate?

Question 14

Is property or liability loss more complext to determine? Why?

Answer 14

”- Property - determination less complex

- Liability - can pose challenges

Question 15

Stock Insurance Companies

Answer 15

”- Most common in US (CIGNA, AIG, ACE)

• Proprietary insurer - can earn profit
• Owned by stockholders

Question 16

Mutual Insurance Company

Answer 16

• Cooperative Insurer
• Owned by policy holders and formed to provide low cost policies to members
• Excess profit after claims and reserves are returned as dividends”

Question 17

Captives

Answer 17

”- Wholly owned subsidiary of parent corporations

• Parent is usually not an insurer
• Usually domiciled offshore; regulation and tax advantages”

Question 18

Alien Insurer

Answer 18

Insurere not incorporated in the United States

Question 19

Domestic Insurer

Answer 19

Insurer incorproated in the state which it is selling coverage

Question 20

Foreign Insurer

Answer 20

Insurer incorporated outside the state selling coverage

Question 21

Admitted Insurer

Answer 21

Licensed to sell insurance in a given state

Question 22

Non Admitted Insurer

Answer 22

”- Not licensed in that state

- Can only sell excess and surplus”