General insurance Principles Flashcards
When an insurance company appoints an agent to represent it, who are the parties to the agency relationship?
principal and agent ..
Life and health insurance companies regulate themselves through each of the following entities or organizations EXCEPT:
Financial industry regulatory authority (FINRA) -they are regulated through variable life products.
Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk?
risk retention (she chose to accept the exposure to risk rather than take measures to reduce the risk to her family)
Jeremy has had an individual health insurance policy for many years b/c of his family’s history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as?
Adverse selection
The tendency of a person that is more likely to have a claim, is higher risk, and usually buys and keeps their insurance b/c of risk is known as what?
Adverse selection
Which entity does NOT rate the solvency of insurance companies?
Lloyd’s of London
A-M Best, Duff and Phelps, and Standard and Poor’s are all rating agencies. True or False
True
Name of an association of individuals and companies that underwrite insurance on their own accounts?
Lloyd’s of London
What is the term that applies to an insurance company domiciled in one state but operating in another, from the perspective of the state in which it operates?
foreign company
Which entity spreads the cost of losses among its members by having each member pay a pro-rata share of these losses?
reciprocal insurer
A group of people or businesses that exchange this promise: Each member agrees to pay a pro-rata share of any loss suffered by any other member. They all add money in to “the pot”
reciprocal insurer
Tim applies for a life insurance policy. His agent gives him a receipt conditioned on Tim’s passing a physical exam to meet underwriting standards. Tim passes the physical exam, but dies before the policy is issued. Will the policy pay the death benefit?
Yes. If the insured dies after the date of the application (or medical exam) and the insurer would have issued the policy, then the coverage takes effect as the date of the application.
State regulation, federal regulation, industry self-regulation, and producer peer review are all means of regulating the insurance business. TRUE or FALSE?
False- Producer peer review is not a means of regulating the insurance business. Producers DO NOT regulate themselves.
The term used to describe the voluntarily surrender of a known right.
Waiver
The name of the term to describe giving up a right WITHOUT the intent to do so. (A party surrenders a right that it failed to preserve)
Estoppel
When classifying insurance risks, insurance underwriters most often use the ____?
Numerical rating system.
Delta insurers typically affirms or denies claims within 120 days after it receives proof of loss statements. What kind of practice is Delta engaging in by doing so?
Unfair claims settlement practice.
It is unfair claims settlement practice for insurers to fail to affirm or deny coverage of claims within how many days after receiving proof of loss statements?
30 days
An insurer must notify its current customers of its privacy policies or practices at least once every how often?
12 months (1 year)
What company regulates agents who sell variable life products?
The financial industry regulatory authority (FINRA)
What was the FINRA (financial industry regulatory authority) formerly known as?
National association of securities dealers (NASD)
An insurance policy provides financial protection against what?
Losses caused by Perils.
By submitting an application along with the first premium, the applicant has done what?
Made an offer to the insurer-which the insurer may or may not accept.
If the applicant submits an application without the first premium, the applicant has done what?
Invited the insurer to make an offer.
For a misrepresentation to affect the validity of an insurance policy, it must be what?
material
In forming the insurance contract, who gives something of value as consideration?
The applicant AND the insurer
What best describes the purpose for the laws of agency?
to govern the authority granted agents to represent the insurers.
The document that defines the agency relationship is the agent’s contract with the insurance company. -What does the “laws of agency” assist/provide?
it expands the agents authority from what is granted/written in the agent’s contract.
An innocent misstatement of age or sex on an insurance application would most likely result in what?
the insurer has the right to adjust the policy’s benefits.
With respect to the insurance contract, the insurance company and the applicant are considered what?
the offeree and offeror
The party making the offer is known as?
The offeror
The party to whom the offer is made to is known as?
the offeree
