First Series Vocab

Question 1

Actuarial Department

Answer 1

This is the department that calculates policy rates, reserves, and dividends.

Question 2

Adjuster

Answer 2

This is the person who investigates claims and arranges for them to be settled or denied.

Question 3

Alien Insurer

Answer 3

In the United States, this is an insurer whose principal office and domicile location is outside this country.

Question 4

Admitted Insurer

Answer 4

This is an insurer who has received a certificate of authority from a state’s department of insurance which authorizes them to conduct insurance business in that state.

Question 5

Agent

Answer 5

This is an individual or organization that’s authorized to solicit, sell, and transact (bind) coverage for specific insurance providers under the terms of one or more agent contracts.

Question 6

Authorized Insurer

Answer 6

This is an admitted insurer.

Question 7

Broker

Answer 7

This is a person who represents himself and the insured (i.e., the client or customer). A broker cannot bind coverage on behalf of an insurance carrier because a broker is not appointed as an agent.

Question 8

Captive Insurer

Answer 8

This is an insurer that’s established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.

Question 9

Certificate of Authority

Answer 9

This is a license that’s issued to an insurer by an insurance department (or equivalent state agency) that authorizes that company to conduct insurance business in that particular state.

Question 10

Claims Department

Answer 10

This is the department that’s responsible for processing, investigating, and paying claims.

Question 11

Divisible Surplus

Answer 11

This is the amount of earnings that are paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

Question 12

Domestic Insurer

Answer 12

This is an insurer with its principal or home office in the state in which it’s authorized.

Question 13

Foreign Insurer

Answer 13

This is an insurer whose principal office or domicile location is in a state that’s different from the state in which it’s transacting insurance business.

Question 14

Fraternal Benefit Society

Answer 14

This is a non-profit benevolent organization that provides insurance to its members.

Question 15

Independent Insurance Agency

Answer 15

This is an agency that any number of insurance companies through contractual agreements.

Question 16

Insurance

Answer 16

This is the transfer of risk through the pooling or accumulation of funds.

Question 17

Insured

Answer 17

This is the customer who receives insurance protection under an insurance policy.

Question 18

Insurer

Answer 18

This is an insurance company.

Question 19

Lloyds of London

Answer 19

This is NOT an insurer but a group of individuals and companies that underwrite unusual insurance policies.

Question 20

Marketing Division

Answer 20

This is the division that’s responsible for acquiring prospective applicants through various advertising media.

Question 21

Monoline Insurer

Answer 21

This is an insurance carrier that only sells one line of insurance.

Question 22

Multi-Line Insurer

Answer 22

This is an insurance company or independent agent that provides a “one-stop-shop” for businesses or individuals who are seeking coverage for all of their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs.

Question 23

Mutual Insurance Company

Answer 23

This is an insurance company that’s characterized by having no capital stock, being owned by their policy owners, and typically issuing participating insurance.

Question 24

Non-Admitted (Unauthorized) Insurer

Answer 24

This is an insurer that has not received a certificate of authority from a state’s department of insurance which authorizes it to conduct insurance business in that state.

Question 25

Nonparticipating Policy

Answer 25

This is a policy that’s typically issued by stock companies. This type of policy doesn’t allow policy owners to participate in dividends or to elect the board of directors.

Question 26

Participating Policy

Answer 26

This is an insurance policy that pays policy dividends to policy owners. By receiving dividends, policy owners share in the company’s divisible surplus and also elect the company’s board of directors.

Question 27

Personal Producing General Agency (PPGA)

Answer 27

This is an agency that represents one or more specific insurers. A PPGA is a similar agency system, but PPGAs don’t recruit, train, or supervise career agents.

Question 28

Policy owner

Answer 28

This is the person who’s responsible for the payment of premiums and who possesses all ownership rights of the contract. Typically, the policy owner is also the insured.

Question 29

Private (Commercial) Insurer

Answer 29

This is an insurer that’s owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned.

Question 30

Producer

Answer 30

This is an individual who’s licensed by one or more states to sell, solicit, or transact insurance in a given state.

Question 31

Proposed Insured

Answer 31

This is the person whose life will be covered by an insurance policy. (See also: Insured).

Question 32

Public Adjuster

Answer 32

This person acts on behalf of a consumer who’s settling an insurance claim.

Question 33

Public Adjuster

Answer 33

This person acts on behalf of a consumer who’s settling an insurance claim.

Question 34

Reciprocal Insurer

Answer 34

This is an unincorporated organization in which all members insure one another. An attorney-in-fact manages it.

Question 35

Reinsurance

Answer 35

This is the acceptance by one or more insurers (referred to as reinsurers) of a portion of the risk being underwritten by another insurer that has contracted with a consumer to cover the entire risk.

Question 36

Reinsurer

Answer 36

This is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to cover on their own and make it possible for insurers to obtain more business than they would otherwise be able to obtain.

Question 37

Risk Retention Group

Answer 37

This is a group-owned liability insurer that assumes and spreads product liability and other forms of commercial liability risks among its members.

Question 38

Sales Department

Answer 38

This department acquires clients through one-on-one meetings in which consumers complete applications.

Question 39

Self-Insurer

Answer 39

This is a company that establishes a self-funded plan to cover potential losses rather than transferring the risk to an insurance company.

Question 40

Service Representatives

Answer 40

These are customer service employees. Service representatives are not required to obtain a license because they neither sell nor solicit coverage, and they don’t bind coverage.

Question 41

Solicitors

Answer 41

These are the individuals who solicit and schedule sales meetings between consumers and the producers for whom they work. Some states separately license these individuals.

Question 42

Stock Insurance Company

Answer 42

This is an insurance company that’s owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.

Question 43

Surplus Lines Insurance

Answer 43

This is non-traditional insurance that’s only available from a surplus lines insurer. This type of insurance provides coverage for substandard or unusual risks and is not available through private or commercial carriers.

Question 44

Unauthorized Insurer

Answer 44

This is a non-admitted insurer.

Question 45

Underwriting Department

Answer 45

This is the department within an insurance company that’s responsible for reviewing applications, approving or declining applications, and assigning risk classifications.