General Insurance

Question 1

Domestic Insurer

Answer 1

An insurer organized under the laws of this state, whether or not it is admitted to do business in this state.
Example: An insurer inc. in New York is considered domestic to New York

Question 2

reinsurance agreements

Answer 2

• Treaty reinsurance agreement that automatically excepts all risk presented by the ceding insurer.
• facilitative - reinsurance agreements that allow the reinsurance company an opportunity to reject coverage for individual risks, or price them higher due to their substandard (higher risk) nature.

Question 3

claims department

Answer 3

Assist the policyholder, insured, or beneficiary in the event of a loss and processes, and pays the amount of the claim in a timely manner, based upon the contractual provisions and amount insured.

Question 4

parol evidence rule

Answer 4

A written contract may not be altered without the written consent of both parties

Question 5

certificate of authority

Answer 5

Authorization granted by the department of insurance to an agency or insured to transact insurance in this state

Question 6

moral hazard

Answer 6

Dishonest tendencies that increase the probability of a loss. Morale hazards most closely related to some form of lying, cheating, or stealing.

Question 7

self- insurer

Answer 7

Self-insurers assume all of the financial risk faced without transferring that risk to an insurer.

Question 8

Personal producing general agent

Answer 8

• Does not recruit career agents.

- sells insurance for carriers it is contracted with and maintains its own office and staff

Question 9

peril

Answer 9

A specific cause of a loss

Question 10

Aleatory contract

Answer 10

Parties to a contract exchange unequal amounts of money. Insureds premium paid is less than the potential benefit to be received in the event of loss

Question 11

Foreign insurer

Answer 11

And insurer organized under the laws of any other state, possession, territory, or the district of Columbia of the United States, whether or not it is omitted to do business in the states.
-example; an insurer Inc. in New York is considered foreign to Kansas

Question 12

Apparently authority

Answer 12

Authority created when the producer exceeds the authority expressed in the agents contract. This occurs when the insured takes no action to counter the public impression that such authority exist.

Question 13

residual markets

Answer 13

Residual markets are a last resort private coverage source for businesses and individuals who have been rejected by the voluntary insurance market. Coverage is typically written as workers compensation, personal auto liability, or property insurance and real estate.

Question 14

insurable events

Answer 14

Any event, whether past or present, which may cause loss or damage or create legal liability on the part of the insured

Question 15

Elements of a legal contract

Answer 15

A legal contract must include 4 necessary elements:

• Competent parties
• legal purpose
• agreement offer and acceptance
• consideration

Question 16

Fraternal benefit societies

Answer 16

Fraternal benefit societies are primarily social organizations that engage in charitable and benevolent activities that can provide life and health insurance to their members. Memberships typically consist of members of a given faith, lodge, order, or society.
Fraternal insurance producers represent the fraternal insurer and sell insurance to fraternal members.

Question 17

non-admitted insurer

Answer 17

And insurer that has not sought approval (or) has not been able to obtain approval to transact business in this state from the commissioner (Director) of insurance.

Question 18

morale hazard

Answer 18

An attitude of indifference towards the risk of loss that increases the probability of a loss occurring

Question 19

personal contract

Answer 19

A contract between the insurance company and the person insured at the time the contract is formed. This is a contract that cannot be assigned.

Question 20

physical hazard

Answer 20

A physical condition that increases the likelihood or probability of loss. Physical hazards may be seen, heard, felt, tested, or smell. Example flammable material store near a furnace.

Question 21

warranties

Answer 21

Statements made on the application that are guaranteed to be true

Question 22

implied authority

Answer 22

Authority the public assumes the producer has. And example would be the business activities of providing quotes, completing applications, and accepting premiums on behalf of the insurer.

Question 23

law of agency

Answer 23

A relationship between two parties where one (the producer/agent) may act on the behalf of the other (the insured/principal) and bind the actions or words of the principal.

Question 24

loss exposure

Answer 24

The extent to which one may be affected by a peril.

Question 25

principle of indemnity

Answer 25

Concept that an insured is restored to the same financial condition as prior to the loss. no profit or loss from insurance transaction

Question 26

Massmarketing

Answer 26

• Used to target a specific type of insurance to a large group of individuals.
• Mass marketing uses the direct response to direct mail method to reach its targeted audience.

Question 27

admitted versus non-admitted

Answer 27

Refers to whether or not an insurer is approved or authorized to write business in the state

Question 28

USA patriot act an anti-money laundering (AML)

Answer 28

Usa patriot act - this act specified which financial institutes would be required to institute AML training programs, including insurance companies. Anti-money laundering AML with the increase of drug trafficking and acts of terrorism, the desire and demand for laundered money has also increased. As of May 2006 insurance companies have been required to provide anti-money laundering training to their producers.

Question 29

adverse selection

Answer 29

The tendency of more bad risk than good risk to purchase and maintain insurance

Question 30

Conditional contracts

Answer 30

Both parties to the contract must perform certain duties and follow rules of conduct to make the contract enforceable

Question 31

Alien insurer

Answer 31

And insurer organized under the laws of any jurisdiction outside the United States, whether or not it’s admitted to do business in the states

Question 32

insurability

Answer 32

The ability of an individual to meet an insurer’s underwriting requirements

Question 33

Direct writing system

Answer 33

• Producer or agent is an employee of the insurer
• Insurer owns the accounts
• The agent may be paid a salary, salary plus bonus, or commission

Question 34

Mccarran- Ferguson act of 1945

Answer 34

Established that the federal government will not regulate the business of insurance in areas which the states have historically had authority to do so (such as producer and company licensing) unless the states fail to cooperate

Question 35

tort law

Answer 35

Torts are civil wrongs; they are not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third-party

Question 36

private firms and persons

Answer 36

• Insurance companies: manufacture and sell insurance coverage in the form of insurance policies or contracts of insurance.
• Insurance producers licensed individuals representing an appointed by an insurance company when transaction insurance business.
• Insured; the person or entity that is covered by the insurer which covers losses due to loss of life help property or liability.
• owner: not necessarily the insured under the policy but is responsible for paying the policies premium

Question 37

marketing /sales department

Answer 37

Responsible for advertising and selling

Question 38

Mutual insurance company

Answer 38

Insurance company owned by policyholders who may be referred to as members

Question 39

fraud

Answer 39

Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal rights

Question 40

Admitted insurer

Answer 40

The insurer that is authorized and has a certificate of authority to do business in a state

Question 41

Risk share plan

Answer 41

Insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels

Question 42

stock insurance company

Answer 42

It’s stock company is owned by stockholders or shareholders. Directors and officers which are elected by stockholders put in place a management team to carry out company’s mission.

Question 43

violent crime control and law-enforcement act of 1994

Answer 43

The act made it a felony for a person to engage in the business of insurance after being convicted of state or federal felony crime involving dishonesty or breach of trust

Question 44

Financial rating services

Answer 44

Independent financial reading services that evaluate and read the claims pain ability and financial stability of insurance companies. (A M best, standard and poor, Moody Weiss and others)

Question 45

insurer

principal

Answer 45

The Insurer is the source of the authority in which the producer/agent must abide

Question 46

Actuarial department

Answer 46

Gathers and interpret statistical information used in rate making. An actuary determines the probability of loss and such premium rates

Question 47

concealment

Answer 47

The withholding of known (material) facts so important that the disclosure of them would change the decision of an insured with respect to underwriting settling a loss or determining premium

Question 48

Utmost good faith

Answer 48

Both parties bargain and good faith informing the contract, and rely upon the statement and promises of each other

Question 49

Reinsurance companies

Answer 49

Reinsurance companies are insurance companies that operate to accept all or a portion of the financial risk of loss from the primary (or ceding ) insurance company

Question 50

hold harmless agreement

Answer 50

A contractual agreement that transfers the liability of one party to another party. Used by landlords, contractors, and others as a way to avoid or reduce risk

Question 51

legal purpose

Answer 51

All parties to contract must enter it for a legal purpose
; public policy cannot be violated by legal contract.
All parties to a contract must enter in good faith

Question 52

domicile

Answer 52

And insured organized under the laws of the state whether or not it is admitted to do business in the states

Question 53

speculative risk

Answer 53

Instances where there is a chance of loss or gain

Question 54

Contract of adhesion

Answer 54

One party prepares a contract (insurer) and submits it to the other party on take it or leave it basis

Question 55

risk

Answer 55

A condition in which a chance of loss exist

Question 56

career agency system

Answer 56

Agents are recruited, trained and supervised by either a manager employee or general agent who is contracted with the insurance company

Question 57

lloyds of London

Answer 57

Consist of groups of underwriters called syndicates, eachOf which specializes in ensuring a particular type of risk. Lloyd’s provides a meeting place and clerical services for syndicates members Who actually transact the business of insurance. Members are individually viable for each risk they assume and coverage provided is under written by a syndicate Managers such as an attorney in fact or individual proprietor.

Question 58

representations

Answer 58

Statements made are said to be true to the best of the applicants knowledge and beliefs

Question 59

valued contracts

Answer 59

A policy which pays a pre-determined amount when a claim is made

Question 60

gramm-leach -bliley act

Answer 60

Repeal parts of the glass Steagall act of 1933 to allow the merger of banks, security companies
, and insurance companies it also establishes the financial privacy rule and safeguards rule for protection of consumers privacy.

Question 61

surplus lines insurance

Answer 61

Fines coverage when insurance cannot be obtained from admitted insurers

Question 62

join underwriting association or joint reinsurance pool

Answer 62

Requires insurers writing specific coverages lines in a given state to assume their share of profit /losses of the total voluntary market premiums written in that state.

Question 63

competent parties

Answer 63

All parties to a contract (i.e. insurer and insured must have legal capacity to enter into a contract)

Question 64

risk retention groups rrg

Answer 64

A group owned insurance that primarily assumes and spreads the liability related risk of its members.

• owned By its policy holders.
• Membership is limited to risk with similar liability exposure such as theme parks, go kart tracks, or water slides.

Question 65

law of large numbers

Answer 65

The larger the number of exposures is considered, the more closely the losses reported will equal the probability of loss.

Question 66

loss

Answer 66

Reduction, decrease, or disappearance of value. A loss is the basis of a claim under the terms of an insurance policy.

Question 67

pure risk

Answer 67

Situations were only the chance of lost and no gain exist.

Question 68

producer (agent)

Answer 68

License individuals representing an insurance company when transacting insurance business.

Question 69

contract law

Answer 69

Pertains to the formation and enforcement of contracts.

Question 70

trade and regulatory associations

Answer 70

National Association of insurance commissioner’s NAIC consist of all see in territorial insurance commissioner’s or regulators. It provides research resources legislative and regulatory recommendations and enter to rotations for state insurance regulators. Also, federal insurance office monitors the insurance industry and identifies inssues and gaps in state regulation of insurers.

Question 71

Insurance contract

Answer 71

• A legal contract purchase to indemnify the insured against a loss, damage, or liability arising from an unexpected event.
• The exchange of a relatively small and definitive expense for the risk of loss that, if it occurs may be large or small.
• A contract designed to transfer rest from the insured to the insurer.

Question 72

indemnity contract

Answer 72

A contract that pays a specific dollar amount not to exceed the amount of the loss

Question 73

fraud and false statements

Answer 73

Any person who knowingly presents faults or fraudulent information on an insurance application or claim for the payment of a loss is guilty of a crime and may be subject to fines in confinement in state prison.

Question 74

commissioner

Answer 74

The state commissioner, supervisor, or Director of insurance is the chief insurance regulator and has the power to issue rules and regulations to enforce state insurance status

Question 75

misrepresentation

Answer 75

Default statement in the application that can render the contract void, if material to acceptance of the risk

Question 76

Direct mail or direct response company

Answer 76

Insurers who sell insurance policies directly to the public with license employees or contractors. A marketing system realizing mass media such as direct mail newspapers, magazines, radios, television, Internet, websites, call centers,and vending machines

Question 77

Distribution models

Answer 77

• Exclusive or captive agency system
• Direct writing system
• Independent agency
• Career agency system
• Personal producing general agent
• Direct mail or direct response
• Massmarketing

Question 78

unilateral contract

Answer 78

Only one party is legally bound to contractual obligation’s after premium is paid. Only the insurer has made a promise of future performance

Question 79

consideration

Answer 79

Insured’s payment of premium in exchange for the insurer’s promise to pay benefits.

Question 80

exclusive or a captive agency system

Answer 80

Deals with the insured through an exclusive or captive agents

• Agency represents Soli one company or group of companies have in common ownership.
• Insurer retrain ownership rights to the business written by the agent
• The agent is an employee or a commissioned independent contractor
• ensure may or may not provide office and agency support services

Question 81

Reasonable expectation doctrine

Answer 81

What a reasonable and prudent policy owner would expect. The reasonable expectations of the policy owners are honored by the courts although the strict terms of the policy may not support these expectations

Question 82

independent agency

Answer 82

• An agent or agency that enters into selling agreements with more than one insurer.
• Agency retains ownership of the business written.
• An independent contractor that is paid a commission and covers the cost of the agency operations.

Question 83

hazard

Answer 83

A specific situation that increases the probability of a loss arising from a peril or that may influence the extent of the loss. (Physical or moral or morale)

Question 84

underwriter

Answer 84

Primary responsibilities include the selection of risk by determining insurability. also determines the classification, or type of risk, and premium rating if a risk is excepted by the insurer.

Question 85

Federal insurance office or FIO

Answer 85

Established by the Dodd Frank Wall Street reform and consumer protection act. this office managers the insurance industry and identifies issues and gaps in the state regulation of insurers. Also monitors access to affordable insurance by traditionally underserved communities and consumers minorities and low and moderate income persons

Question 86

reciprocal insurance company

Answer 86

A reciprocal insurance company as a group owned insure who is mean activity is reassuring

Question 87

Waiver

Answer 87

Voluntary surrender of a no rights claim or privilege

Question 88

Express authority

Answer 88

Authority that is written into the producers contract. An example would be a producers binding authority if written in the contract.

Question 89

fair credit reporting act

Answer 89

Protects consumer privacy and from overly intrusive information collection practices

Question 90

insurable risk requirements

Answer 90

Large numbers of homogeneous units.
Calculate bowl
Loss must be measurable 
Premiums must be affordable 
Loss must be accidental
Cause financial hardship
Excludes war, nuclear attacks and illegal acts

Question 91

estoppel

Answer 91

Judicial denial of a contractual right based on prior actions contrary to what the contract requires

Question 92

insurable interest

Answer 92

The potential for an insured or beneficiary to suffer a financial or economic hardship in the event of a loss

Question 93

National Association of insurance commissioners NAIC

Answer 93

• Consist of all stay and territorial insurance commissioner’s or regulators.
• provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators.
• promotes uniformity among states.
• NAIC has no legal authority to intact or enforce insurance laws