Insurance companies – Lesson 2 Flashcards
What is an admitted insurer?
Any insurer approved to transact business in California is an admitted one, without regard to location.
Who is an admitted insurer?
- Domestic
- Foreign
- Alien
Who writes the insurance code?
The state legislature
What type of an insurance company issues participating policies?
Mutual
What is the retention limit?
The maximum amount a company is willing to retain on a risk.
What is a foreign insurer?
An insurer organized under the laws of any jurisdiction outside the State of California, whether or not admitted.
An insurer admitted to do business in California may elect not to participate in a guaranty Association. True or false?
Falls
An independent agent is:
Someone who has appointments with several insurers and represents the insurers.
A managing general agent is a licensed insurance agent:
- Has to power to appoint, supervise, or terminate the appointment of local agents in a specified territory.
- Has management contract with one or more admitted insurers.
- Has the power to accept or decline risk.
When an insurance company reinsurers a risk, the ceding company relinquishes all responsibility for the payment of any potential loss. True or false?
False
Agents may possess three types of authority: Express, implied, and apparent. Give an example of an apparent authority.
An agent uses the application forms and literature of an insurer with whom he no longer has an appointment.
Description of a reciprocal:
An unincorporated association of subscribers who agree to ensure one another.
An insurance agent has a fiduciary duty to:
- The insurer
- The applicant
- The client
The insurance commissioner should complete an audit of each insurer doing business in California at least:
Once every five years
Who does a solicitor represent?
A property and casualty agent/broker.
What are the functions of an actuary?
- Prepare annual statements
- Determine dividends
- Determine premiums and make sure they are adequate
When a mutual insurer becomes a stock insurer, it is referred to as:
Demutualization
Who offers insurance coverage?
- Federal government
- State governments
- Private companies
The insurance commissioner’s position is an appointed or elected position?
Elected by the public
The commissioner has a right to try to rehabilitate a financially impaired company. This right is to:
Protect the policyholders
An insurance agent is:
Licensed to transact property/casualty insurance.
What is an exclusive agent?
Is appointed by one company.
An agency relationship can be defined as:
A situation where one party (agent) has the authority to act for another (the principal) in dealing with third parties.
An agent, as a fiduciary, should:
- Have a good business reputation.
- Qualified to transact insurance business.
- Act in good faith.
Mutual insurers are corporations owned by whom?
Policy owners
Policies issued by mutual insurers are referred to as what?
Participating policies
Stock insurers are corporations organized for the purpose of making a profit for whom?
Stockholders
The type of policy issued by stock companies is called what?
Non-participating
Do policyholders in a stock Insurer share the companies profits?
No, dividends are paid to the stockholders.
In a mutual company, any surplus is return to whom and in what form?
- Policy owner
2. In the form of dividend
Surplus can be defined as excess earned or saved by the insurance company. Earned surplus is generated by:
Mortality, interest, and expenses
Who are Reinsurer?
Insurance companies that assume part of a risk written by a primary carrier which is referred to as the ceding company.
The body of law regulating the insurance industry is what?
Insurance code
The interpretation of policy provisions is not a primary objective of insurance regulation. True or false?
True
What is one of the major concerns of the commissioner regarding insurance company transacting business in the state of California?
The solvency of the insurance company.
Records must be delivered to the commissioner within how many days following a written demand?
30 days
An exclusive agent is also known as what?
Captive agent
A person who is not appointed by an insurer, but rather for compensation acts on behalf of a client to transact insurance other than life and health insurance is known as what?
A broker
A person who has an agency agreement with more than one insurance company is known as what?
Independent agent
It normally takes how many years for the insurance company to be able to recapture the costs of issuing a policy?
Three years
