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CompuCram > General Insurance > Flashcards

General Insurance Flashcards

1
Q

An individual appointed by an insurance company to solicit, negotiate, effect, or countersign insurance contracts on its behalf.

A

Agent

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2
Q

The number of dollars to be paid by each party is unequal in an insurance contract.

A

Aleatory

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3
Q

A temporary policy.

A

Binder

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4
Q

A legal agreement between two parties promising a certain performance in exchange for a certain consideration.

A

Contract

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5
Q

The portion of an insurance contract that sets forth the rights and duties of the insured and the insurance company.

A

Conditions

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6
Q

An individual who represents an insured (client).

A

Broker

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7
Q

An individual appointed by an insurer to administer its business in a given territory. A GA is responsible for building the agency and service force. Compensation is on a commission basis, although there may be additional expense allowances.

A

General Agent

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8
Q

This relationship is developed when a person relies on, or places confidence, faith, or trust in another’s person’s action or advice.

A

Fiduciary Relationship

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9
Q

This concept is related to waiver. Once a person or company waives a known right, the waiver cannot be reversed.

A

Estoppel

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10
Q

Define Insurable Interest

A

Financial relationship with property such that if the property is damaged, you would suffer financial loss.

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11
Q

Insurance is designed to restore the policyowner to the same financial condition enjoyed prior to a loss. Make whole again, back in the position prior to the loss; Not better, Not worse.

A

Indemnity

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12
Q

A condition that increases the chance of a loss occurring.

A

Hazard

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13
Q

A condition where an individual or entity may suffer economic loss if property is damaged or destroyed.

A

Insurable Interest

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14
Q

The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service.

A

Insured

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15
Q

The insurance company assuming risk and agreeing to pay claims or provide services. Also known as the carrier.

A

Insurer

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16
Q

Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary (money-related) sense.

A

Liability

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17
Q

There are numerous types of marketing methods available to insurers, such as agency systems, direct-selling, independent agency systems, and exclusive agency systems.

A

Mass Marketing System

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18
Q

The written contract or certificate effecting insurance, including papers attached to and made a part of it.

A

Policy

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19
Q

The happenings or events which cause a loss.

A

Peril

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20
Q

1) Consideration for the insurance. 2) Periodic payment made to keep a policy in force.

A

Premium

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21
Q

An agent licensed by the state to handle the placement of business with non-admitted insurers.

A

Surplus Lines Agent

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22
Q

A risk in which there is no chance of gain, only loss.

A

Pure Risk

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23
Q

Insurance that indemnifies a person with an interest in property for its loss.

A

Property Insurance

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24
Q

Only the insurer makes legally enforceable promises in the contract. The insured is not required to pay the premiums, but the insurer is required to pay the benefits under the contract if the insured has paid the premiums and met certain other basic provisions.

A

Unilateral

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25
Q

Risk Management- C-A-R-T-S

A

Control, Avoid, Retain, Transfer, Share

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26
Q

the larger the group of similar risks; the more predictable the losses of the group will be
•for this law to operate, it is essential that a large number of exposure units be combined

A

Law of Large Numbers

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27
Q

Something that increases the chance of loss

A

Hazard

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28
Q

What is this type of hazard: dead tree next to your house that can blow over during next wind storm

A

Physical Hazard

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29
Q

What type of hazard? dishonest client who intentionally damages his own property

A

Moral Hazard

30
Q

What type of hazard? careless client, or one with no pride of ownership in her property

A

Morale Hazard

31
Q

anything that can cause a loss

A

Peril

32
Q

What are the (6) types of All Risk/Open Perils- Property Insurance

A
  • (mold, dry rot, rust)

- (War, Earthquake, Flood exclusions on both policies)

33
Q

What does this mean- Loss must be ascertainable or measurable

A

carrier must be able to put monetary value on the loss

34
Q

What does this mean- Loss must be uncertain

A

These losses cannot be planned

35
Q

Economic Hardship

A

nature of the loss must present economic hardship to insured. Must be economically feasible to to insure

36
Q

Exclusion of Catastrophic Perils

A

Perils that do not lend themselves to prediction; such as war, nuclear risk, and earthquakes. can’t calculate loss-these are not Insurable

37
Q

Adverse Selection

A

exclusions designed to prevent adverse selection. (to solve this problem, NFIP (National Insurance Program) offers flood insurance in designated areas. Not Insurable

38
Q

What are the 9 types of Insurers

A
  1. Stock- owned by stockholders
  2. Mutual- owned by policyholders, (policy dividends)
  3. Reciprocal- self insurer- managed by an attorney-in-fact (done frequently on medical side)
  4. Surplus lines- will insure anything for a price- need a special license (agents for agents)
  5. Reinsurance: insurance for insurers / will reduce the risk of catastrophic loss (airlines, freight boats, earthquakes) cluster of companies come together to insure X.
  6. Government Insurer: social insurance: Flood, Medicare, Crop, Terrorism, etc.
  7. Fraternal- belonging to the club (lodge or fraternal organization)
  8. Lloyd’s Association- Individuals that assume risks (surplus lines)
  9. Risk Retention Groups: Insurance for themselves
39
Q

What are the classification of insurers (6)

A
  1. Domestic- conducts business in Ohio
  2. Foreign- conducts business in a state where it is not resident
  3. Alien- located outside of US
  4. Admitted/Authorized- licensed to do business in the state
  5. Non-Admitted/Unauthorized- not licensed to do business in the state (Surplus Lines are exempt from licensing)
40
Q

What are the financial rating systems based on?

A

Rating how much financial reserve an insurer has:

AM Best / Moody’s / Standard & Poors

41
Q

What are the 3 types of marketing systems and how do their agents operate?

A
  • Independent agent- owns the expirations & represent many insurers (Nat Gen)
  • Captive Agent- do not own their expirations. (represent only one company)
  • Direct Writer/Direct Response- owns the expirations. Job function is to sell companies insurance.
42
Q

When insurers agree in advance to offer certain types of risks to reduce the risk of a catastrophic loss and a re-insurer agrees to accept them, what has occurred?

A

Re-insurance: Reinsurance is a form of insurance that occurs between insurers when the reinsurer agrees to accept all or a portion of a risk covered by another company.

43
Q

A unincorporated group of individuals sharing risk and managed by an attorney-in-fact is a ___________

A

Reciprocal Group

44
Q

An unauthorized company writing business in the state that is not subject to state approved policy forms, rates, or rules is known as a _________.

A

Surplus lines companies can charge whatever they want and their policies can say whatever they want. They are NOT authorized to do business in the state and therefore not subject to state approved policy forms, rules and rates.

45
Q

A deductible in an insurance policy is an example of _____.

A

Retention is the assumption of risk (e.g., dealing with potential loss with your own resources). A deductible is that portion of any covered claim you pay from your own sources.

46
Q

Swamp Mutual obtains a certificate of authority to do business in the state and agrees to abide by the state laws regulating the insurance business. Swamp Mutual is a(n) __________?

A

Applying for a certificate of authority to operate in the state and agreeing to abide by the laws and regulations of that state describes an admitted /authorized insurer in the state.

47
Q

Adverse selection is best characterized by what phrase?

A

Adverse selection involves an insurer being selected by an applicant with a greater-than-average chance of loss, like flood insurance. Insurers must carefully screen out these applicants with sound underwriting criteria.

48
Q

Kim shows up at the agent’s office to pay her premium on her policy that cancelled last night. The agent accepts the premium and Kim believes her policy is paid. This is an example of what kind of agent authority?

A

Apparent- The agent’s actions have given Kim the impression that the company has accepted the premium on the cancelled policy. This is an example of apparent authority based on the agent’s actions. To Kim, apparently, the agent can do this by his actions and in her eyes the actions of the agent are the actions of the company and the law would agree with her.

49
Q

Which of the following best describes a Lloyd’s Association and Risk Retention Groups?

A

They are groups of individuals coming together to insure certain types of risks and each individual is responsible for the risk they accept.

50
Q

The insured pays a small premium and the insurer promises to pay a large amount if a covered loss occurs. This is an example of a

A

Aleatory Contract- Since the amount of money at risk between the two parties is so uneven, the contract is considered to be aleatory in nature.

51
Q

In order for a contract to be enforceable, it must have certain characteristics.

A

They are: competent parties, legal purposes, offer and acceptance, and consideration.

52
Q

In a property insurance contract, an insured’s consideration is the

A

Payment of the premium: Consideration in a contract is the item of value that a party brings to the contractual relationship.

53
Q

What represents valuable consideration on behalf of the insured?

A

Valuable consideration is exchanged in a contract. The applicant gives the statements in the application as well as the premium dollars, while the insurance company gives its promise to pay in the event of a future loss.

54
Q

Concealment is defined as

A

the deliberate omission of a material fact from the agent or the company.

55
Q

What is Express authority?

A

Express authority is what the agent contract says an agent can or cannot do while representing the insurer. “official authority” is a nonsense term.

56
Q

Property taken over by an insurance company to reduce its loss. The company may dispose of, or salvage, property as it wishes, but on request and proper reimbursement, may return it to the insured.

A

Salvage

57
Q

The chance of loss only, no gain

A

Pure Risk

58
Q

Offers the opportunity for gain as well as the possibility of loss

A

Speculative Risk

59
Q

Amount of risk presented by a particular event or action

A

Exposure

60
Q

What acronym is used to manage risk

A

CARTS (7)

Controlled, Avoided, Retained, Transferred, or Shared

61
Q

Vicarious Liability

A

Imposed on a person even though the person is not a party to the particular occurrence.

62
Q

Aggregate Limit

A

A type of police limit found in Liability policies that limit coverage to a specified total amount for all losses occurring within the policy period

63
Q

True or False: Insurance deals with Speculative Risk

A

False

64
Q

Give an example of a physical risk.

A

Ice on the sidewalk increases the chance someone will fall. (something tangible or physical)

65
Q

Give an example of a morale risk.

A

Knowing ice is on the sidewalk and not removing it. (personal character flaw that increases the chance of loss)

66
Q

Give an example of a moral risk.

A

Fraud

67
Q

A legal wrong one person does to another. Tort law is the basis of all civil law. Negligence is an unintentional tort and is covered by liability policies.

A

Tort

68
Q

A percentage penalty charged on insurance canceled by the insured, before the end of the policy period. Return premium is calculated on a short-rate basis, meaning the insurance company keeps a portion of the unearned premium to cover expenses.

A

Short Rate

69
Q

Clause in a Fire policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share. Also known as the Other Insurance claus

A

Pro-Rata Liability

70
Q

The customer is “stuck” with the way the policy is worded, so any vague wording will be ruled in the customer’s favor.

A

Doctrine of Adhesion.

71
Q

The transfer to the insurance company of the insured’s right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice.

A

Subrogation

72
Q

Insureds should reasonably expect certain things to be covered without actually reading the policy. Insurance policies are based on the ______ ______ _______.

A

Doctrine of Reasonable Expectations.

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