Insurance Industry Flashcards
Stock Insurance Companies
Owned by investors who might or might not have insurance from those companies
Mutual Insurance Companies
Owned by the policyholders
Participating Policies are typically sold by…
Mutual companies
Participating Polices allow the policyholder to receive…
Non-taxable dividends
Dividends
Return of premium
Non-Participating Policies are typically sold by…
Stock companies
Non-Participating Polices do not allow for…
Non-taxable dividends
Domestic Insurer
Selling and incorporating in the same state
Foreign Insurer
Selling in a state but incorporated in another state
Alien Insurer
Selling in a state but incorporated in another country
Admitted Insurer
Officially allowed to sell in a given state
Admitted insurers can sell regardless of…
Being domestic, foreign, or alien
Non-Admitted Insurer
Not officially allowed to sell in a given state
Fraternal Benefits Society
Non-profit clubs selling insurance solely to their members
Government/Social Insurance
MCR for seniors; MCD for the needy; SS for seriously disabled; SS for retirees; Tricare
Reinsurance
Insurance for insurance companies
Reinsurance is purchased from…
Private insurers or provided by the government
Producers
Sell insurance to the public
Producers analyze…
Insurance-specific needs of consumers
Producers collect/facilitate…
Payment of premiums
Producers provide…
Important insurance-related documents to applicants, policyholders, and carriers
Producers facilitate updates to…
Coverage or policyholder information
Producers assist…
In communication about claims
Agency
Legal relationship created when one person represents another
Agent
Person representing someone
Principal
Person being represented
The agent is expected to…
Advocate for and serve the principal
Notice to the agent is…
Notice to the principal
Payment to the agent is…
Payment to the principal
Express Authority
Made clear in writing or conversation
Implied Authority
Technically not mentioned but can reasonably be assumed by the agent to exist
Apparent Authority
What you make the public think you can do on your principal’s behalf
Waiver
Relinquishment of a right under a law or contract
Estoppel
Prevents a party from exercising a right that has presumably been waived
Estoppel can protect a consumer when…
An agent’s instructions contradict the insurer’s requirements
Insurance Brokers
Represent consumers in insurance transactions
Brokers are generally not obligated to…
Place business with a particular company
Binding
To accept risk on an insurer’s behalf
Insurance Agent
Represent insurance companies in insurance transactions
Agents generally have a…
Legal obligation to only place business with certain insurers
Captive Agent
Independent contractor represents one insurer and can only sell/recommend that company’s products
Independent Agent
Represents multiple insurers and can sell/recommend any of those companies’ products
Interim Insuring Agreements
Can provide temporary coverage for losses that occur while application is under review
Interim Insuring Agreements should only be issued if…
Agent receives a completed application and first premium
No interim insuring agreement =
No coverage until policy is delivered
Interim insuring agreements are replaced by…
The policy
Binder
Provides temporary coverage while policy/application is being issues/evaluated
Losses will be covered while Binder is in effect, even if…
Carrier ultimately declines the applicant
Conditional Receipt
MIGHT provide temporary coverage while policy/application is being issues/evaluated
Losses will only be covered in the interim if…
Carrier would’ve otherwise accepted the applicant at the same price and no problems with application
Product Suitability
Producers must ensure that products and coverage are suitable for the consumers situation
Product suitability typically incorporates an…
Initial needs analysis
Product suitability likely requires…
Periodic coverage reviews
Product suitability applies to…
Agents and Brokers
Underwriters
Decide whether to accept the risk posed by an applicant and at what price
Application
Contains information about the applicant, the risk associated with the applicant and relevant previous losses
Application is often considered part of…
Insurance contract and must be accurate/complete
Underwriters use application primarily to…
Evaluate risk
Corrections to the application must be…
Initialed by the applicant
Unanswered questions must be addressed…
Prior to policy being issued
Inspections might involve…
Financial records; credit and background checks; health exams; review of previous loss history
Inspections generally require…
Pre-notice to the applicant
Fair Credit Reporting Act
Federal law pertaining to consumer data from third parties
FCRA: Informs consumer when negative action is taken based on…
Info from third-party reports
FCRA: Provide contact info to obtain…
Free copy of the damage report
FCRA: Consumer has how many days to receive requested report?
60 Days
FCRA: Consumer has the ability to…
Report alleged errors
FCRA: Information in credit reports can’t be more than…
7 years old; 10 years for bankruptcy
Medical Information Bureau
Information reported by insurers on application/underwriting information (not by doctors and not claims data)
MIB: Non-profit funded by…
Life and health insurers
MIB: Info is on file for…
7 years
MIB: Info about insurers that access your records is kept for…
2 years
MIB: Access is limited to…
Insurers with a pending application or claim
MIB: Consumers can access their info for free every…
Year or when a negative action is taken by an insurer
Rate
Mathematical representation of risk posed by the applicant and all similarly situated individuals within the insurer’s pool
Premium
Rate multiplied by dollar amount of requested insurance
Premium might include…
Discounts or other special adjustments
Premium Mode
Schedule for payment (annual, monthly, etc)
Premium: Fewer installments =
Lower Price
Insurer Solvency
Insurer’s assets must at least equal its liabilities
Insurer solvency is often determined by…
Mandatory financial reports submitted to the DOI
Misrepresenting an insurer’s financial status is a…
Federal Crime
Solvency: Regardless of harm to the public
10 years in prison
Solvency: Ultimately harms the public
15 years in prison
Independent Rating Organizations
Private companies that indicate an insurer’s financial strength
Guaranty Funds
State funds intended to pay claims when an insurer becomes insolvent
Guaranty funds typically only pay…
Up to a certain amount
Guaranty funds do not apply to…
Non-admitted insurers
Gramm-Leach-Bliley Act
Federal law with various requirements for financial institutions
GLBA: Financial Privacy Rule
Governs collection and disclosure of customers’ personal financial info by financial institutions
GLBA: Financial Privacy Rule allows consumers to…
Opt-out of certain sharing
GLBA: Safeguards Rule
Requires all financial institutions to design, implement, and maintain safeguards to protect customer info
GLBA: Pretexting Provisions
Protect consumers from individuals and companies that obtain personal financial info under false pretenses
