Insurance Industry

Question 1

What are Stock Insurance Companies?

Answer 1

Insurance companies that are owned by investors who may or may not have insurance from those companies

Question 2

What are mutual insurance companies?

Answer 2

Insurance companies that are owned by their policy holders. (Policy holders might receive dividends that are treated as a return of premium.)

Question 3

What’s the difference between domestic, foreign, and alien insurers?

Answer 3

Domestic Insurers are Licensed and incorporated in the same state. Foreign Insurers are Licensed in a state but incorporated in another state. Alien Insurers are Licensed in a state but incorporated in another country.

Question 4

What’s the difference between Admitted and Non-Admitted Insurers?

Answer 4

Admitted Insurers have formal permission to sell in a given state. Non- admitted insurers have no formal permission to sell in a given state.

Question 5

What are excess and Surplus Lines?

Answer 5

Insurance sold from non-admitted carriers. (Can be sold when coverage is not available from admitted insurers.) (Must be sold through a licensed Surplus lines Broker)

Question 6

What are government insurance programs?

Answer 6

Government insurance programs often provided when risks are too high for private insurance. (residual market).

Question 7

What are FAIR plans?

Answer 7

FAIR plans are private insurance programs provided for high-risk properties in exchange for federal help with catastrophic losses.

Question 8

What is Reinsurance?

Answer 8

Insurance for Insurance companies. Purchased from private insurers or provided by the government.

Question 9

What do Insurance Producers do?

Answer 9

-Analyze insurance needs of customers.
-Sell insurance products to the public.
-Collect premiums
-Provide insurance related documents to the consumer.
-Update coverage or policyholder information.
-Assist in communication about claims.

Question 10

What is an Agency?

Answer 10

An Agency is the legal relationship created when an agent represents a principal.
-The agent is expected to advocate for and serve the principal.
-Notice to the Agent is notice to the Principal.

Question 11

What are the Types of Agent authority?

Answer 11

Expressed authority, Implied authority, and Apparent authority

Question 12

What are the differences between the types of agent authorities?

Answer 12

Expressed authority is made clear in writing or conversation.
Implied authority is technically not mentioned but can be reasonably assumed by the agent to exist.
Apparent authority might not actually exist but can be assumed to exist by a third party.

Question 13

What do agents and brokers have in common?

Answer 13

Both are Producers.

Question 14

What are some differences between agents and brokers?

Answer 14

Agents generally represent insurance companies in transactions while brokers generally represent the consumer.

Question 15

What are interim insuring agreements?

Answer 15

Interim insuring agreements can provide temp coverage for losses that occur while a consumers application is still under review.
(They should only be issued if an agent receives a completed application and first premium)

Question 16

What are the 2 types of Interim Insuring agreements and what are their differences?

Answer 16

Binders provide temporary coverage while the application is being reviewed and cover losses regardless of if the application gets accepted.
Conditional receipts provide temp coverage and only cover losses if the application gets accepted.

Question 17

What’s the difference between a Captive agent and an Independent Agent?

Answer 17

Captive agents are independent contractors that can only represent and sell products from one company.
Independent Agents represent and sell products from multiple companies.

Question 18

What is product suitability?

Answer 18

Producers must ensure that products and coverage are suitable for the consumers situation.

Question 19

What is an underwriters role?

Answer 19

Underwriters decide whether to accept risk posed by an applicant and at what price.

Question 20

What is included in the application?

Answer 20

The application contains information about the applicant, the item being insured, the risk associated with the property or applicant and the relevant previous losses.

Question 21

What procedures are involved with inspections?

Answer 21

Inspections might involve: property inspections, financial records, credit & background checks, health exams, & review of loss history.

Question 22

What is the Fair Credit Reporting Act?

Answer 22

The Fair Credit Reporting Act is federal law pertaining to consumer data from third parties:
-Informs the consumer when negative action is taken.
-Provides contact info to obtain a free copy of the damaging report
-Consumer has 60 days to receive requested report
-Info often cant be older than 7 years

Question 23

What’s the difference between rate and premium?

Answer 23

Rate is a mathematical representation of the risk posed by the consumer and all similarly situated individuals within the insurers pool.
Premium is the rate multiplied by the dollar amount of requested insurance.

Question 24

What is insurer solvency?

Answer 24

Insurer Solvency says that the insurers assets must at least equal its liabilities.
(determined by financial reports to the DOI)

Question 25

What are Independent Rating Organizations?

Answer 25

IRO’s are private companies that indicate an insurers financial strength.

Question 26

What are guaranty funds?

Answer 26

Guaranty funds are state funds intended to pay claims when an insurer becomes insolvent.

Question 27

What are the Gramm Leach Bliley Requirements?

Answer 27

Federal law with various requirements for financial institutions:
-The Financial Privacy Rule governs the collection and disclosure of customers’ personal financial information by financial institutions.
-The Safeguards Rule requires all financial institutions to design, implement and maintain safeguards to protect customer information.
-The “pretexting provisions” protect consumers from individuals and companies that obtain personal financial information under false pretenses.”