Insurance Company Organization And Regulation Flashcards
What is a mutual insurance company?
Insureds are also owners of the company and are able to vote to elect management. Profits are returned to insureds in forms of dividends or future premium reduction
What is a stock company
When a stock company first forms it sells stock go stockholders to raise the money necessary to operate the business
What is an advance premium company?
They charge non assessable premiums and are required to set aside money in a reserve In case claims amounts are higher than expected
What are assessment companies?
They provide primarily fire and windstorm insurance to farmers and small towns and they charge a pro rata share of losses at the end of each policy period
What is a reciprocal company?
Members agree to share insurance responsibility with all other members f the unincorporated group
What is a lloyds association?
A voluntary association of individuals or group of individuals who agree to share in insurance contracts
What are fraternal benefit societies?
Incorporated societies or orders without capital stock that is operated on the lodge system and conducted solely for the benefit of its members and their benefactors and not for profit
What is the Liability Risk Retention Act (1981)
Created to give product manufacturers more options when insuring against product liability it allows product manufacturers to establish group self insurance programs or group captive insurance companies, called risk retention groups to protect them against product liability exposures and to purchase liability insurance on a group basis through purchasing groups.
Liability Risk Retention Act (1986)
Amends the 1981 act by giving right to form risk retention groups and purchasing groups to nearly all businesses
What is risidual market insurance?
The government steps in and provides
Insurance that is not ordinarily available from private insurers.
War risk insurance, nuclear energy liability insurance, flood insurance, and federal crop insurance
What are the four lines of insurance?
Property, casualty, life, and health
What is life insurance?
It is designed to handle the risk of premature death or the risk that an individual may outlive his or her financial resources
What is health and disability insurance?
Designed to handle the risk of medical bills and loss of income resulting from injury or sickness
What is property insurance?
Includes many types of insurance designed to handle property risks- risks that we will suffer financial loss because something we own is damaged or destroyed
Types: dwelling, homeowners, commercial property, inland marine, ocean marine, and crime
What is casualty insurance?
One of the most important risks covered by the casualty line is the liability risk- the risk that we will suffer financial loss as a result of our actions towards others
Types: aviation, auto, workers compensation, and surety bonds
What are personal lines?
Property and casualty insurance coverages that protect an individual or family.
What are commercial lines?
Coverages designed for businesses
What is an insurance agent?
Represents the insurance company- is the direct link between the company and its insureds
Insurance agent responsibilities?
Selling insurance, issuing and counter signing policies, collecting premiums, and providing a link between the insured and the insurance company
What is countersigning?
Countersigning means the agent signs each new policy prepared by the commonly before delivering it to the insured.
What does “field underwriting each risk” mean?
Using preestablished criteria to seek out the type of business that is likely to be acceptable to the company
What is a quotation?
Used to show the prospect the premium for proposed coverage
What is errors and omissions insurance?
Errors and omissions insurance should be purchased by agents to protect themselves against legal liability arising from inadvertent errors or omissions
What is an agency relationship?
Exists when one party (an agent) is authorized to act on behalf of another (a principal)
What is express authority?
Authority specifically given to an agent either orally or in writing by the principal
What is implied authority?
Authority given by the insurance company to the agent that is not formally expressed or communicated
What is apparent authority?
A doctrine that holds that an agent may have whatever authority a reasonable person would assume the agent has
What are the four basic distribution systems to market insurance?
Exclusive agency system, direct writer system, direct response system, independent agency system
What is an exclusive/captive agency system?
The insurance company contracts with agents which are an independent business to represent and sell insurance only for that insurance agency.
What is the direct writer system?
Insurance company’s agents are actually employees: may receive a salary or be paid by commission or both
What is a direct response system?
There are no agents, companies sell directly through mail/phone
What is an independent agency system?
Agencies that are independent contractors contract with several different companies to represent and sell insurance for these companies
What is an independent or non exclusive agent?
And agent who represents more than one company