General Insurance Health Flashcards
Agent/Producer
a legal representative of an insurance company; the classification of producer
usually includes agents and brokers; agents are the agents of the insurer
Applicant or proposed insured
a person applying for insurance
Broker
— an insurance producer not appointed by an insurer and is deemed to represent the client
Insurance policy
a contract between a policyowner (and/or insured) and an insurance company
which agrees to pay the insured or the beneficiary for loss caused by specific events
Insured
the person covered by the insurance policy. This person may or may not be the
policyowner
Insurer (principal
the company who issues an insurance policy
Policyowner
the person entitled to exercise the rights and privileges in the policy
Premium
the money paid to the insurance company for the insurance policy
Reciprocity/Reciprocal
— a mutual interchange of rights and privileges
Insurance
a contract in which one party (the insurance company) agrees to
indemnify (make whole) the insured party against loss, damage or liability arising
from an unknown event.
insurance transaction
Solicitation;
Negotiations;
Sale (effectuation of a contract of insurance); and
Advising an individual concerning coverage or claims.
Risk
is the uncertainty or chance of a loss occurring. The two types of risks are
pure and speculative, only one of which is insurable
Reinsurance
a contract under which one insurance company (the reinsurer)
indemnifies another insurance company for part or all of its liabilities
ceding insurer (reinsurance)
The originating
company that procures insurance on itself from another insurer
assuming insurer (reinsurance)
The insurance company that takes on the risk
reinsurance treaty
When an insurer has an automatic reinsurance agreement between
itself and the reinsurer in which the reinsurer is bound to accept all risks ceded to
it,
Stock companies
owned by the stockholders who provide the capital
necessary to establish and operate the insurance company and who share in any
profits or losses. Officers are elected by the stockholders and manage stock
insurance companies. Traditionally, stock companies issue nonparticipating
policies, in which policy owners do not share in profits or losses.
Mutual companies
are owned by the policyowners and issue participating policies.
With participating policies, policyowners are entitled to dividends, which, in the
case of mutual companies, are a return of excess premiums and are, therefore,
nontaxable. Dividends are generated when the premiums and the earnings
combined exceed the actual costs of providing coverage, creating a surplus.
Dividends are not guaranteed
Fraternal Benefit Societies
an organization formed to provide insurance benefits
for members of an affiliated lodge, religious organization, or fraternal organization
with a representative form of government. Fraternals sell only to their members
and are considered charitable institutions, and not insurers. They are not subject
to all of the regulations that apply to the insurers that offer coverage to the public
at large.
Reciprocals
insurance resulting from an interchange of reciprocal agreements
of indemnity among persons known as subscribers, collectively known as a
Reciprocal Insurance Company or Exchange
Risk Retention Groups
a liability insurance company owned by its
members. The members are exposed to similar liability risks by virtue of being in
the same business or industry. The purpose of a risk retention group is to assume
and spread all or part of the liability of its group members.
Lloyd’s Associations
Lloyd’s is not an insurance company. Lloyd’s provides support facilities for
underwriters or groups of individuals that accept insurance risk.
Lloyd’s associations are a group of individuals who operate an insurance
mechanism using the same principles of individual liability of insurers that Lloyd’s
of London uses, in that each individual underwriter assumes a part of each risk.
Each individual promises to pay a specified amount in the event that the
contingency insured against occurs. Members are liable only for their portion of
the risk and are not bound to assume any portion of a defaulting member
Risk Retention Group
is a liability insurance company owned by its members.
A large number of units having the same or similar exposure to loss is known as
homogeneous
conditions or situations that increase the probability of an insured loss occurring.
Hazards
physical
moral
morale are types of ___________
Hazards
individual characteristics that increase the chances of the cause of loss. exist because of a physical condition, past medical history, or a condition at birth, such as blindness.
Physical
hazards
tendencies towards increased risk
involve
evaluating the character and reputation of the proposed insured.
hazards refer to those applicants who may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer
Moral
hazards
arise from a state of mind that causes indifference to loss, such as carelessness
Morale
hazards
the
causes
of loss insured against in an insurance policy
Perils
defined as the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril
Loss
__________means eliminating exposure to a loss.
avoidance
________ is the planned assumption of risk by an insured through the use o fdeductibles, co-payments, or self-insurance.
Risk Retention
is a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group
Sharing
____________ would include actions such as installing smoke detectors in our homes, having an annual physical to detect health problems early, or perhaps making a change in our lifestyles.
Reduction
Risk that are
Due to chance, Definite and measurable, Statistically predictable, Not catastrophic, Randomly selected and large loss exposure are considered to be_________-
Insurable
A loss that is outside the insured’s control is a risk that is _______________
Due to chance
A loss that is specific as to the cause, time, place and amount. An insurer must be able to determine how much the benefit will be and when it becomes payable. Is called
Defi nite and measurable
Insurers need to be reasonably certain their losses will not exceed specific limits. This is covered in the concept of a loss being ________________
Not catastrophic
There must be a suffi ciently largepool of the insured that represents a random selection of risks in terms of age,gender, occupation, health and economic status, and geographic location
Randomly selected and large loss exposure
owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses.
Stock companies
Officers are elected by the stockholders and manage stock insurance companies.
Stock companies
__________issue
nonparticipating
policies, in which policy owners do not share in profits or losses.
Stock companies
____________ are owned by the policyowners and issue
participating policies
Mutual companies
a _______________ policyowners are entitled to dividends
Mutual companies
in the case of mutual companies, are a return of excess premiums and are, therefore,
nontaxable
.
Dividends
a ___________________ is an organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.
fraternal benefit society
__________ sell only to their members and are considered charitable institutions, and not insurers.
They are not subject to all of the regulations that apply to the insurers that offer coverage to the public at large.
Fraternals
A ____________ is insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers,
reciprocal
______________ are administered through an attorney-in-fact common to all persons. Subscribers agree to become liable for their share of losses and expenses incurred among all subscribers, and they authorize the attorney-in-fact to manage and operate the exchange.
Reciprocals
A _______________ is a liability insurance company owned by its members.
risk retention group
The purpose of a_________ is to assume and spread all or part of the liability of its group members a ____________ may reinsure another _________ liability as long as the members of the second are engaged in the same or similar business or industry.
risk retention group
_________
is not an insurance company. ________ provides support facilities for underwriters or groups of individuals that accept insurance risk.
Lloyd’s
_____________ are a group of individuals who operate an insurance mechanism using the same principles of individual liability of insurers that ________ uses, in that each individual underwriter assumes a part of each risk
Lloyd’s associations
Each individual promises to pay a specified amount in the event that the contingency insured against occurs. Members are liable only for their portion of the risk and are not bound to assume any portion of a defaulting member. Refers to a ___________
Lloyd’s associations
___________
is a type of coverage that is not readily available on admitted market. Such coverages are marketed through non-admitted insurers who specialize in offering insurance to the high-risk market on an unregulated basis under each state’s _______ laws.
Surplus lines
While _________ insurers are not admitted, most states require that they be on that state’s “approved” list
surplus lines
Before insurers may transact business in a specific state, they must apply for and be granted a license or
_______________
from the state department of insurance and meet any financial (capital and surplus) requirements set by the state.
Certificate of Authority
Insurers who meet the state’s financial requirements and are approved to transact business in the state are considered
______________
into the state as a legal insurer.
authorized or admitted
Those insurers who have not been approved to do business in the state are considered
_________
unauthorized or nonadmitted
Most stateshave laws that prohibit unauthorized insurers from conducting business in the state, except through ______ brokers.
licensed excess and surplus lines
Insurers must obtain a ___________ prior totransacting business in this state
Certificate of Authority
Insurance companies are classified according to the
____________. Regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state
location of incorporation
domicile
A ____________ is an insurance company that is incorporated in this state
domestic insurer
A __________ is an insurance company that is incorporated in another state orterritorial possession (such as Puerto Rico, Guam or American Samoa)
foreign insurer
An _________ is an insurance company that is incorporated outside the UnitedStates
alien insurer
The financial strength of an insurance company is based on _____, __________, __________ (amount of money kept in a separate account to cover debts to policyholders), and _________, to name a few.
prior claims experience
investment earnings
level of reserves
management
Guides to insurance companies ‘financial integrity are published regularly by the following various independent rating services
AM Best Fitch Standard and Poor's Moody's Weiss
1 independent agent represents several companies
Nonexclusive
Commissions on personal sales
Business renewal with any company
Independent AgencySystem/
American Agency System
1 agent represents 1 company Exclusive Commissions on personal sales Renewals can only be placed with the appointing insurer
Exclusive AgencySystem/
Captive Agents
General agent-entrepreneur represents 1 company
Exclusive
Compensation and commissions
Appoints subagents
General AgencySystem
No agents
Company advertises directly to consumers (through mail, Internet, television, other mass marketing)
Consumers apply directly to the company
Direct Response Marketing System
Branch manager (supervises agents)
Salaried
Agents can be insurer’s employees or independent contractors
Managerial System
