Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

General Insurance > General Insurance > Flashcards

General Insurance Flashcards

1
Q

Insurance

A

The transfer of risk. -Transfers the risk from an individual or business to an insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Risk

A

Uncertainty about whether a loss will occur. -if a loss is certain to occur, it is not a risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Speculative Risk

A

Chance of loss or gain. Not insurance.

I.e. gambling loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Pure Risk

A

Chance of loss only. Can be insured.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Exposure

A

Risks for which the insurance company would be liable. Risk assumed by insurer. Expressed in units.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Loss

A

A reduction in the value of an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Peril

A

A cause of loss. The insurer agrees to cover losses caused by a specified peril like death (life) or sickness/accidents (health)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Hazard

A

Something the increases the chance that a loss will occur

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Three types of hazards

A

Physical, moral and morale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Moral Hazard

A

Arise from an individual’s character. Dishonesty. A belief that intentionally causing a loss is acceptable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Physical Hazard

A

Physically identifiable hazard (a heart condition)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Morale Hazard

A

A state of mind or careless attitude. I.e. forgetting to lock a door

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Methods of handling risk

A

-Sharing
-Transfer
-Avoidance
-Reduction
-Retention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Sharing of risk

A

Two or more individuals agree to pay a portion of any loss incurred by any member of the group

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Transfer of risk

A

Insurance. Spreads a risk of loss among many.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Avoidance

A

Eliminating a particular risk by not engaging in a certain activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Reduction

A

Lessening the chance that a loss will occur, or lessening the extent of the loss that does occur

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

The Law of Large Numbers

A

The larger the group-the more accurately losses can be predicted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Elements of Insurable Risk

A

-Calculable
-Affordable
-Non-catastrophic
-Homogeneous
-Accidental
-Measurable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Adverse Selection

A

Risks that have a greater than average chance of loss

-The tendency for higher-risk individuals to get and keep insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Underwriting

A

An extensive evaluation of information related to a particular risk. Used to avoid adverse selection. Determines level of risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Reinsurance

A

Transfers the risk from one insurer to another, like insurance for insurers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Facultative Reinsurance

A

Reinsurer considers each risk before allowing the transfer to be made from the ceding company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Treaty Reinsurance

A

The reinsurer accepts all risks of a certain type from the ceding company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Stock insurer
A business formed as a public or private corporation and owned by its stockholders -if company makes money, a taxable dividend may be paid to the stock/shareholders -issues non-par policies
26
Mutual Insurer
Does not have stock or stockholders and is owned by its poly holders/owners. If company is profitable, excess premiums can be returned to its policyholders as non taxable dividends -issues participating policies
27
Fraternal Benefit Societies
Exist for the benefit of its members and offers life insurance as one of the benefits of membership -organized under a lodge system -operate as nonprofit societies and receive some income tax advantages -policies are called certificates
28
Reciprocal Insurer
Incorporated groups of people that agree to insure each other’s losses under a contract -members are known as subscribers -members are assessed the amount they have to pay if a loss to any member occurs -run by an attorney-in-fact
29
Risk Retention Group
An insurer formed for the sole purpose of providing liability insurance to its policyholders -owned by the insured or members -must all be members of the same type of business
30
Lloyd’s Associations
Insurance provided by individual underwriters, not insurance companies -insure oddities like hole-in-one contests, quarterback’s arm etc
31
Self-Insurance
Retaining risk and is a business that pays its own claims with savings set aside to cover losses
32
Domestic Insurer
The state where a company is incorporated
33
Foreign Insurer
Operates in any state or U.S. territory other than the state where incorporated
34
Alien Insurer
Incorporated in any country other than the U.S.
35
Certificate of Authority
State license for an insurance company
36
Admitted/Authorized Company
Has a state certificate authority to sell insurance
37
Non-Admitted, Unauthorized, Nonapproved Insurance Company
Companies allowed to sell insurance to certain types of risks (surplus) without having to have a license
38
Surplus Lines Insurance
Sold by unauthorized/non-admitted insurers approved by the state -only be sold to certain high risk insureds -can’t be sold just for a cheaper rate than licensed/admitted insurers
39
Independent Insurance Agents
Individuals that sell the insurance products of several companies and are independent contractors, not employees of the insurer
40
Exclusive or captive agents
Represent only one company. Are independent contractors, not employees.
41
General Agents (GAs) or Managing General Agents (MGAs)
Hire, train, and supervise other agents within a specific geographical area. Receive overriding commissions on the business produced by agents they manage.
42
Direct-writing companies
Pay salaries to employees whose job function is to sell the company’s insurance products from the company office. Not usually paid a commission and insurer owns all business produced
43
Direct response marketing
-no producer/agent -policies are sold directly to the public by the insurer
44
Agency
One person is authorized to represent and act for another person or corporation
45
Agent
Person authorized to act on behalf of the principal (insurance company)
46
Principal
The insurer, on whose behalf the agent acts
47
Express authority
The authority made explicit in a producer’s written agency agreement
48
Implied authority
Not written in the agency contract but is assumed to be granted to an agent in accordance with general business practices -actions agents normally do to sell insurance like make business cards
49
Apparent authority
Authority that others believe the agent has -actions agent does that a reasonable person would assume as authority
50
Fiduciary
A person in a position of financial tryst. Obligated to act in best interest of trustee.
51
Commingling
Mixing personal funds with the insured’s or insurer’s funds
52
Suitability considerations
Agent has a responsibility to make purchase recommendations that are appropriate or suitable, in light of a client’s particular needs, objectives and circumstances
53
Elements of a Legal Contract
-Consideration -Legal purpose -Offer -Acceptance -Competent parties
54
Consideration
Exchange of value. In insurance, applicant provides consideration in the form of information and premium, insurer provides consideration in the form of priories to pay if certain loss occurs
55
Adhesion
Provisions are written by only one party to the contract, and the other party is required to adhere to them
56
Aleatory contract
The value received from the contract by each party may be unequal. -small premium for large amount of coverage -lots of premium paid with no loss
57
Utmost Good Faith
The insured and insurance company have a right to expect honesty from each other
58
Insurance policies are __________, or one-sided, because only one party is legally bound to perform under the contract
Unilateral
59
Insurance policies are conditional contracts because:
They require certain conditions to be fulfilled in order for performance under the contract to be enforced. Insured must pay the premium for coverage and file a claim if a loss occurs.
60
Indemnity
Contact is intended to restore the insured to the financial state prior to the loss- no more and no less
61
Representation
A statement that is believed to be true, to the best of one’s knowledge at the time it is givenm
62
Misrepresentation
Information that is given that is not true
63
Material misrepresentation
Information given that is not true and DOES affect the insurer’s decision. False information must have been a determining (material) factor in the insurer’s acceptance of the risk
64
Warranty
A statement that is guaranteed to be true
65
Concealment
Intentional failure to disclose known facts
66
Fraud
An intentional act designed to deceive and induce another party to part with something of value
67
Waiver
The intentional and voluntary giving up of a known right
68
Estoppel
A legal doctrine that prevents a party from denying an action if it had been accepted previously
69

General Insurance (20 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions