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Health and Life Insurance > General Insurance > Flashcards

General Insurance Flashcards

1
Q

What are the main elements of a legal contract?

A
  1. Agreement (offer and acceptance)
  2. Consideration
  3. Competent parties
  4. Legal purpose
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2
Q

Indemnify

A

Make whole

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3
Q

Pure risk

A

Can only result in no loss or no change. Only type of risk that an insurer will cover

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4
Q

Speculautive involves either loss or gain. Not insurable

A
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5
Q

Exposure

A

Units of measure used to determine rates for insurance coverage

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6
Q

What factors are determining rates?

A

Age, medical history, occupation, and sex

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7
Q

Peril

A

The causes of loss

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8
Q

Methods of handling risk

A

Avoidance, retention, sharing, reduction, transfer

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9
Q

Retention

A

Planned assumption of risk through the use of deductibles, co-pays, and self-insurance. The purpose of retention is to:

  1. Reduce expenses and improve cash flow
  2. Increase control of claim reserving and claims settlements, and
  3. Fund for losses that cannot be insured
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10
Q

Reduction

A

Reducing the possibility of loss, such as installing smoke detectors and having annual physical checkups

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11
Q

Elements of insurable risk

A 
Due to chance
Definite and measurable
Statistacally predictable
Not catastrophic
Randomly selected and large loss exposure
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12
Q

Types of insurers

A 
Stock companies
Mutual companies
Fraternal Benefit Societies
Reciprocal companies
Risk retention groups
Lloyd’s associations
Surplus lines
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13
Q

Stock companies

A

Stockholders own and operate

Nonparticipating policies (policyholders do not receive dividends, but stockholders do)

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14
Q

Mutual companies

A

Owned by policyholders. Participating policies with non-guaranteed, non-taxable dividends (because they are excess premiums)

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15
Q

Reciprocals

A

Results from an interchange of indemnity of subscribers, collectively known as Reciprocal Insurance Company or Exchange. Put into effect and adminstered through an attorney-in-fact common to all persons

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16
Q

Risk retention groups

A

Liabilitiy insurance companies owned by its members, which spreads out liability throughout as long as the other members are of the same or similar business or trade

17
Q

Surplus lines

A

Offer insurance to high-risk market

18
Q

AM Best, Fitch, Standard and Poor’s, Moody’s, and Weiss are all what?

A

Independent rating services that publish guides to insurance companies’ financial integrity

19
Q

Marketing/Distribution systems

A 
Independent agency /American agency system
Exclusive agency system/Captive agents
General agency system
Managerial system
Direct response marketing system
20
Q

Independent/American agency system

A

One independent agent represents several companies
Nonexclusive
Commission on personal sales
Business renewal with any company

21
Q

Exclusice agency system/captive agents

A

One agent represents one company
Exclusive
Commissions on personal sales
Renewals can only be place with appointing insurer

22
Q

General agency system

A

General agent-entrepreneur represents one company
Exclusive
Compensation and commision
Appoints sub-agents

23
Q

Law of agency

A

The acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer

24
Q

Types of agent authority

A

Express
Implied
Apparent (perceived)

25
Q

Expressed authority

A

Expressed in the actual contract

26
Q

Implied

A

The agent is assumed to have in order to transact business for the insurer

27
Q

Apparent authority

A

(Perceived authority) Appearance or assumption of authority based on actions, words, or deeds of the principal or because of circumstances the principal created

28
Q

Fiduciary responsibility

A

In a position of trust

29
Q

Consideration

A

Something of value that each party gives to the other.

30
Q

Legal purpose

A

Insurable interest and consent

31
Q

Aleatory

A

Unequal values

32
Q

Unilateral

A

One-sided

33
Q

Adhesion

A

Only one party prepares the contract and the other accepts it or rejects it

34
Q

Representations

A

Statements believed to be true to the best of one’s knowledge, but they are not guaranteed to be true

35
Q

Estoppel

A

Process used to prevent a party from reasserting a right, claim, or privilege that has been waived

36
Q

Broker

A

An insurance producer not appointer ny an insurer and is deemed to represent the client

37
Q

Faculative reinsurance

A

When reinsurance is purchased on a specific policy

38
Q

Reinsurance treaty

A

When an insurer has an automatic reinsurance agreement between itself and the reinsurer in ehich the reinsurer is biund to acceot all risks ceded to it

39
Q

Lloyd’s Associations

A

Acts as an insurance market rather than companies. Insurance underwriters and brokers work together to conduct transactions that are facilitated by their members in the same organization.

Health and Life Insurance (8 decks)

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