General Insurance Flashcards
Who does the agent or producer always represent?
The insurer
What are the 4 elements of a contract?
Agreement - offer/acceptance
Consideration
Competent party
Legal purpose
What is consideration?
The insurance companies promised to pay per the contract
The applicants promise to pay the premium
What defines a competent party?
Mentally sound and of legal age 18 or older
What is the contract of adhesion?
A contract drafted by one party
AKA
take it or leave it
What is an aleatory contract?
Contracts that involve an exchange of unequal amounts.
Such as an insurance policy
What is a personal contract?
A contract between insured and the policy owner can be person or individual business
I.E life or health policy
What is a unilateral contract?
A contract where one party makes an enforceable promise
.. such as an insurance policy where only insurer makes the promise that can be enforced
Who do ambiguities in a contract favor
They always favor the insured
Indemnity
To make a person whole not profit
What is an estopple ?
A stop will exist when a party cannot regain a right or privilege that was voluntarily waved or given up
What can a risk be?
Person, Property or activity
that is insured.
What are the 2 types of risk?
Pure risk - only risk insurable
Speculative risk
What is the only risk and insurance company will cover?
Pure risk
Name the 4 types of hazards
Physical hazard
Moral hazard - dishonest
Morale hazard - careless
Legal hazard
What Is a cause of not lost known as?
Peril
What are the 5 methods of handling risk?
STARR
Sharing- oldest way sharing w/group Transfer - most common buying insurance Avoidance - Reduction - Reducing Retention - Do nothing use own funds to pay (deductible in Health ins)
What happens to the risk when a person purchases an insurance policy?
They TRANSFER the risk
Under the law of large numbers when the sample size increases the prediction becomes more or less accurate?
More accurate.
What type of insurer is owned by the shareholder or stockholder?
A stock insurance company
What type of insurer is owned by policy holders?
A mutual insurance company
and the dividends are not taxable
Is lloyds of London an insurance company?
No It’s more like a stock exchange
What is a captive insurance company?
An insurer owned by a parent company that uses the captive insurer to insure the risk of the parent company or affiliate at a lower rate
What are the 6 classes of insurers?
Private and Government
Admitted and Non-admitted
Domestic, foreign and alien
If an individual can’t get coverage on the private market what market do they go to?
Government market
The government market is also known as what?
Residual market -last chance
Other than the annual report how can you find out the financial strength of a company?
A. M. Best company Conning & company Demotech Fitch Ratings Moody's Standard and Poor's Weiss Ratings
What are the 4 marketing distribution systems?
Independent agency - non exclusive
Executive agency - exclusive
Managerial System - only one insurer
Direct response marketing - TV marketing
What is the difference in an independent and exclusive agent?
Independent agent representsone or more companies
Exclusive agents represent only one company
What is the common law principle that governs the relationship between the producer and the company?
The rules (or Law) of Agency
Name 2 parties involved in the agency relationship
The principal and the agent
Name the 3 types of authority in the agency relationship
Express authority - written authority
Implied authority - implied bot not written
Apparent authority - authority assumed
What are the 4 components of a legal contract?
LACC
Legal Purpose
Agreement (offer/acceptance)
Consideration
Competent Purpose
What is consideration?
The extension for consideration is insurance co promised to pay claims versus applicants promise to pay premiums. Consideration is something of value.
Who is a competent party?
Over the age of 18 and mentally sound
What are the characteristics of an insurance policy?
Contracts of adhesion - take it or leave it
Allatory contracts - exchange of un equal amounts
Personal contracts - contracts between insurer & indv person or business
Unilateral contracts - only 1 party makes enforceable promise
Conditional contracts - conditions insurer/insured obligated to
What characteristics of an insurance contract states unequal values are exchanged?
Aleatory
Which characteristic of an insurance contract states that only 1 party is legally bound to the agreement?
Unilateral contracts
What principle indicates a person has given up a known or legal right that will not be able to reaquire that right?
Waiver and Estoppel
What is endimity?
To make a person whole
What is a captive insurer?
An insurance company created only to cover insurance risk of his parent company for affiliates
