General Insurance Flashcards
Risk Management Key Terms:
Increases the chance of risk occurring.
Hazard
Risk Management Key Terms:
The cause of loss, like a fire or hail.
Peril
Risk Management Key Terms:
Is loss or nothing, no chance of gain, only this type of risk is insurable.
Pure Risk
Risk Management Key Terms:
Lying on purpose, like lying on an insurance application.
Moral Hazard
Risk Management Key Terms:
Is a loss, lose or gain - like gambling.
Speculative Risk
Risk Management Key Terms:
The reduction or disappearance of value.
Loss
Risk Management Key Terms:
What are the two types of risks called?
- Pure Risk
- Speculative Risk
Risk Management Key Terms:
Are material and structural things you can see and touch.
Physical Hazard
Risk Management Key Terms:
The unit of measurement to determine rates for an insured based on how risky they are.
Exposure
Risk Management Key Terms:
The uncertainty or chance of loss occurring.
Risk
Risk Management Key Terms:
A sense of carelessness.
Morale Hazard
Methods of Handling Risk:
I am a STARR at ___________ ________.
S - hare
T - ransfer
A - voidance
R - etention
R - eduction
Handling Risk
Methods of Handling Risk:
When a company indemnifies (back or supports another insurance company) another.
Reinsurance
Methods of Handling Risk:
The more data you have to look at - the more predictable the losses will be.
The Law of Large Numbers
Types of Insurers:
Are incorporated associations named and modeled after one the earliest issuers of insurance, Lloyd’s of London, an internal marketplace for specialty insurance coverage.
Lloyd’s Associations
Types of Insurers:
Social organizations that engage in charitable and benevolent activities that provide primarily life insurance to their members. Usually a nonprofit.
Fraternal Insurers
(Fraternal Benefit Societies)
Types of Insurers:
Means the insurer is selling in this state, but they are incorporated in a different state.
Foreign Insurer
Types of Insurers:
Are owned by policyholders, issue participating policies, and dividends are not taxed.
Mutual Company
Types of Insurers:
Are owned by shareholders, issue non-participating policies, and dividends are taxed.
Stock Company
Types of Insurers:
Means the insurer is incorporated and selling in this state.
Domestic Insurer
Types of Insurers:
Means the insurer is headquartered in another country.
Alien Insurer
Authority and Powers of Agents:
Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties.
Implied Authority
Authority and Powers of Agents:
When the principal gives the agent authority in writing.
Express Authority
Authority and Powers of Agents:
Perceived and assumed by the customer.
E.g. business cards/letterheads/stationary
Apparent Authority
Elements of a Legal Contract:
Are of sound and mind, old enough, and not under the influence of drugs and alcohol.
Competent Parties
Elements of a Legal Contract:
Is deceiving or lying to cheat the insurance company.
Fraud
Elements of a Legal Contract:
Is when the customer submits an application.
Offer
Elements of a Legal Contract:
Is when the insurer issues a policy.
Acceptance
Elements of a Legal Contract:
Is known as offer and acceptance.
Agreement
Elements of a Legal Contract:
Means both parties bring something of value.
Consideration
Characteristics of Insurance Contracts:
A contract between the insurance company and the individual, and it cannot be transferred or assigned to another party.
Personal Contract
Characteristics of Insurance Contracts:
Says the insurer writes the policy and the customer takes it or leaves it.
E.g. sticky like a bandaid
Adhesion Contract
Characteristics of Insurance Contracts:
Is a one-sided promise, only the insurer is legally bound to do anything.
Unilateral Contract
Characteristics of Insurance Contracts:
Is an unequal exchange.
E.g. the customer pays a small monthly premium, insurer pays very large claim.
E.g. 2 a seasaw
Aleatory Contract
Characteristics of Insurance Contracts:
Both parties must perform certain duties to make the contract enforceable.
Conditional Contract
Legal Concepts and Interpretations Affecting Contracts:
Once an insurer has waived a legal right, they cannot claim that right in the future.
The judicial consequence that follows a waiver: it denies a contractual right based on prior actions contrary to what the contract states.
Estoppel
Legal Concepts and Interpretations Affecting Contracts:
The voluntary surrender of a known or legal right or advantage.
Waiver
Legal Concepts and Interpretations Affecting Contracts:
Means withholding or hiding information on the application.
Concealment
Legal Concepts and Interpretations Affecting Contracts:
A false statement whether it is a misrepresentation or concealment, is made intentionally to deceive or induce another party.
Fraud
Legal Concepts and Interpretations Affecting Contracts:
Assumes that both parties bargain in good faith when forming and entering into an insurance contract.
Utmost Good Faith
Legal Concepts and Interpretations Affecting Contracts:
Are untrue statements.
Misrepresentation
Legal Concepts and Interpretations Affecting Contracts:
Is an absolutely true statement.
Warranty
Legal Concepts and Interpretations Affecting Contracts:
Means to restore the insured to their previous financial condition.
Indemnity
Legal Concepts and Interpretations Affecting Contracts:
Are statements that are believed to be true but are not guaranteed to be true.
Represention
