General Insurance Principles - Insurance Providers Flashcards
Types of Insurers
Private and Government
Two Types of Commercial Insurance
Stock and Mutual
Stock Insurance Company
Insurance companies owned by stockholders and that may pay taxable dividends to their stockholders. The companies have minimum capital requirements and are governed by a board of directors elected by their stockholders.
Mutual Insurance Company
Insurance companies owned by policy holders and that may pay non-taxable dividends to the policy holders. The companies have minimum capital requirements and are governed by a board of directors elected by their stockholders.
Demutualization
The process a mutual insurance company goes through to become a stock insurance company.
Mutualization
The process a stock insurance company goes through to become a mutual insurance company.
Medical Car Service Providers
These organizations blend characteristics of commercial insurance companies and medical care providers.
Fraternal Benefit Societies
An organization of people who share a common ethnic, religious, or vocational affiliation. Fraternal benefit societies are entities that
- ) Have no capital stock;
- ) Have a representative form of government;
- ) Exist not for profit but solely for the benefit of their members and their beneficiaries; and
- ) Operate on a lodge system with a ritualistic form of work.
Fraternal societies may provide insurance to their members. Fraternal insurers are nonprofit organizations that operate under a special section of the insurance laws of the state in which they are approved. They specialize primarily in life insurance and annuity products that are usually available only to the society’s members.
Home Service Companies (Industrial Insurance) (Debit Companies)
A stock or mutual company that distributes industrial life insurance.
Industrial Life Insurance (Burial Insurance)
Individual life insurance coverage in small face amounts usually less than $10,000 and that require no medial exam to qualify. Typically, the insurance agent meets with the policy owner at home, weekly or monthly, to collect the premium.
Reciprocal Insurance Exchanges
An unincorporated group of individuals (called subscribers), working together through an attorney-in-fact, who each agree to pay a pro rata share of any loss suffered by any other member.
Lloyd’s Association
An association of individuals and companies that band together to underwrite unique insurance risks on their own accounts. It offers a forum for large companies and brokers to find insurers. A member can be either a person or a company. Members are organized into syndicates, with each syndicate specializing in a particular risk.
Risk Retention Group (RRG)
An insurance company that provides self-insurance services to owner-members who all have a business, occupation, or professional relationship with one another.
Risk Purchasing Group
A group of persons or entities with similar risks who form an organization for the purpose of buying insurance on a group basis. These persons are usually members of a similar business or trade. Purchasing groups do not make insurance available for the general public; they exist to provide coverage for their members.
Surplus (Excess) Lines Insurance
A market for insurance not available from any admitted company within a state. Applicants seeking insurance for a unique risk may turn to a surplus lines broker in their state to find an insurer outside of the state that will provide the desired coverage.
Reinsurance
A formal agreement in which both the risk and the premium received by an insurer for insurance policies is shared with one or more other companies. The insurer seeking to transfer some of its risk is known as the ceding company. The insurer accepting some of the risk being transferred is known as the reinsurance company. The ceding company pays a premium to the reinsurer for its coverage. When a reinsured loss occurs, the reinsurer indemnifies the ceding company for its share of the claim.
Ceding Company
An insurer seeking to transfer some of its policy risks onto another company.
Reinsurance Company
An insurer accepting some of the risk of another insurer’s policies in exchange for a premium.
Federal Insurance Programs
- ) Social Security Insurance (formerly Old-Age, Survivors and Disability Insurance/OASDI);
- ) Medicare (formerly Supplemental Medical Insurance/SMI);
- ) Medicaid
State Insurance Programs
- ) Workers’ Compensation
- ) Unemployment Insurance
- ) State-run Medical Insurance Plans
Admitted Insurer
A company that has received a certificate of authority from a state in which it wants to transact insurance business
Certificate of Authority
A document issued by a state that allows the company to transact insurance within the state. It certifies that the company has met the state’s requirements for conducting insurance business. An insurer must be separately admitted in every state in which it transacts business.
Non-Admitted Insurer
A company that transacts business in a state for which it does not hold a certificate of authority (i.e., surplus lines insurance).
Unauthorized Insurer
A company that is presenting the products it sells as “insurance” when in fact the product is not a valid insurance product (and the company is not a legitimate insurance company).
