General Insurance Flashcards
What is the most common form of risk management?
Insurance
One party is transferring the risk of financial loss to an insurance company so that the insurer absorbs the costs associated with the risk instead of the loss being suffered by that policy.
Policy Contract
Uncertainty or chance of a loss occuring
Risk
What is an insurance policy’s main intent?
To indemnify a party with insurable interest in a financial loss of a person or some property.
To make whole or to restore a person back to where they were before the financial loss.
Indemnify
Insurable, no opportunity for financial gain, only loss is suffered, but not all are insurable
Pure Risks
Not insurable, opportunity for financial gain, loss, or reward is possible.
Speculative Risks
Many units having similar risks present
Homogenous
A situation increasing the odds of a loss or circumstance that increases risks or exposure to risks.
Hazard(s)
What are the 3 main classes of hazards?
- Physical Hazards
- Moral Hazards
- Morale Hazards
A physical condition or status that increases the chance of loss.
Physical Hazards
Dishonest acts & fraud.
Moral Hazards
Reckless & irresponsible or blatant lack of concern for handling risks in a prudent manner.
Morale Hazards
Causes of loss or actual events from which decreases are suffered that are covered by the policy.
Peril
he decline in value of a person or thing, the decrease that is suffered after a peril occurs.
Loss
What are the 5 methods commonly used in risk management?
- Avoidance
- Retention
- Sharing
- Reduction
- Transfer
Staying away from a risk altogether
Avoidance
Involves bearing the loss yourself if the loss occurs
Retention
Establishing a homogenous group with which to _________the risks for similar losses so that losses are less per individual.
Share
Decrease the possibility or significance of loss when the loss can’t be avoided.
Reduction
Shifting the loss from a risk to another party by contract & done through the purchase of an insurance policy
Transfer
What are the elements in risk?
- unexpected
- measurable
- large homogenous group
- not completely disastrous
- not mandetory
- predictable frequencies
Groups of investors willing to back the risk of a policy in exchange for receiving a premium with people who want insurance.
Lloyd’s Underwriters
What are groups of investors called?
Syndicate
___ have a certificate of authority from the state department to sell it’s insurance products in the state.
Authorized (Admitted) Insurer
___ don’t have certificate of authority.
Unauthorized insurers
What are the categories insurers are categorized by their state of incorporation or where their coporate charter was organized?
Domestic
Foreign
Alien
What category does an insurer fall under if they are incorporated in Louisiana?
Domestic
What category does an insurer fall under when they are incorporated in the U.S. & U.S. territories othan than Louisiana?
Foreign
What category does an insurer fall under when they are formed outside the U.S.?
Alien
What is it called when agencies publish regular information about the strength & stability of insurers stay tup to date on the insurer’s claims, reserves, profits, & investments?
Financial Status
aka
Independant Rating Services
A legal term that applies to someone representing someone else.
Agent
Who do client’s pay?
Insurer
Who does the insurer pay?
Agent
Who does the producer legally represent?
Insurer
What are the types of authority?
- Express
- Implied
- Apparent
_____ given authority to do certain things on behalf of the insurance company because functions were expressed orally or in writing.
Express Authority
Inherent to the nature of sales contracts & the expectations.
Implied Authority
___ understood as part of the job but are not specifically spelled out, point-by-point, in the contract.
Implied Authority
___ when insurance companies indicate by their actions.
Apparent Authority
What are the elements of a legal contract?
- Offer & Acceptance
- Consideration
- Competent Parties
- Legal Purpose
___ an agreement between two parties or more that is enforceable by law.
Legal contract
Take it or leave it contracts
Contract of Adhesion
Consideration that is being exchanged is unequal or unrelated o the consideration given by the other party.
Aleatory Contract
___ only one party in the contract has made a legally enforceable promise & is bound by law to act.
Unilateral Contract
___ both parties have conditions to meet to execute the contract.
Conditional contract
___When contract language has more than one meaning.
Ambiguity
____ when the ambiguity is obvious.
Patent
___ hidden ambiguities.
Latent
___ when a producer or insurer can lead the customer to beleive that certain coverages are in existence during the sales process.
Reasonable Expectations
What are the legal interpretations affecting contracts?
- Ambiguous terms in contract of adhesion
- Reasonable expectaions
- Indemnity
- Utmost Good Faith
- Representation/Misrepresentation
- Warranties
- Concealment
- Fraud
- Waiver/Estoppel
___ a policy will only be as good as the information submitted in the application.
Utmost Good Faith
___ smething a person states that they believe to be true.
Representation
___ when people answer questions dishonestly.
Misrepresentations
____ an engagement by the insured party that certain statements are true or that certain conditions shall be fulfilled, the breach of it invalidating the policy
Warranties
___ withholding substantial & relevant information that is needed for an insurer to decide about a policy or its benefits.
Concealment
___ the intent to deceive & mislead for a specific benefit or gain.
Fraud
___ legal term for giving up a right or privilage.
Waiver
___ the legal process used to stop someone from trying to get a right or privilage back that they already waived.
Estoppel
