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Life Insurance > Insurers > Flashcards

Insurers Flashcards

1
Q

What is the major difference between government and private insurance?

A

Government insurance is funded with taxes but private insurance is funded with premiums.

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2
Q

Name how we classify Private insurance companies

A
  • ownership
  • Authority
  • Location (domicile)
  • Marketing and distribution systems
    *Rating (financial strength)
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3
Q

stock companies

A

owned by the shareholders who provide capital to establish and operate
and share the profit or loss of the insurance company.

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4
Q

Nonparticipating policies

A

policy owner does not share (participate) in profit or loss

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5
Q

Mutual companies

A

owned by POLICY holders who are entitled to dividends and use participating policies

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6
Q

dividends (mutual companies)

A

non taxable return of excess premiums

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7
Q

Fraternal Associations

A

insurance only for members of an organization. They don’t have to follow regulations of the public insurance company.

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8
Q

Risk purchasing group

A

Offers insurance to a group of similar businesses that have similar exposure to risk based on their expense/loss experience. Other people don’t get this price. Also, they’re exempt from most state laws rules, and regulations except for the state the group is domiciled in.

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9
Q

Certificate of Authority

A

a license needed to conduct business in a specific state for insurers if they meet the capital and surplus requirements set down by the state

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10
Q

Authorized / unauthorized insurers

A

Authorized/admitted means the state has approved the insurers (who meet the financial requirements) to conduct business. Unauthorized can only conduct business through licensed excess and surplus line brokers.

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11
Q

Domestic, foreign, Alien means:

A

in-state, out-of-state, out of country

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12
Q

insurance companies are classified according to:

A

location of incorporation (domicile)

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13
Q

Marketing: Independent (American) Agency System

A

1 independent agent represents several companies, nonexclusive. Commission for personal sales. Business renewal with any company.

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14
Q

Marketing: Exclusive Agency System/ Captive agents

A

1 agent represents a single company. Exclusive. commissions from personal sales. Renewals can only be placed w/ the appointing insurer.

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15
Q

Marketing: General Agency System

A

General agent-entrepreneur represents 1 company. Exclusive. Compensation ad commissions. Appoints subagents.

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16
Q

Marketing: Managerial System

A

The branch manager supervises agents. salaried. Agents can be insurers’ employees or independent contractors.

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17
Q

Direct response marketing

A

no agents. company advertises directly to consumers through email, the internet, television, other mass marketing, Consumers apply directly to company.

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18
Q

Independent rating services

A
  • Am best
  • Fitch
  • Standard and Poor’s
  • Moody’s
  • Weiss
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19
Q

Reinsurance

A

insurance for insurance companies. Ceding procures insurance from the assuming which acts as the reinsurer.

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20
Q

Law of agency

A

Defines the relationship between the Principal and the agent

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21
Q

The law of Agency understanding

A
  1. Agents represent the insurer
  2. Any knowledge of the agent is presumed knowledge of the insurer
  3. If the agent is working within the conditions of their contract, the insurer is fully responsible
  4. When the insured submits payment to the agent, it is the same as submitting payment to the insurer
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22
Q

Express

A

Authority granted to Agents from a principal dictated in a contract

23
Q

Implied Authority

A

Not every single detail of an agent’s authority can be spelled out. Implied authority is the Assumed authority an agent has in order to do his job.

24
Q

Apparent Authority

A

the assumption of authority based on the actions, words, or deeds, of the principal

25
Q

Fiduciary responsibility

A

it is illegal to mix the premiums of the insured with your own funds. A fiduciary is someone in a position of trust.

26
Q

Market conduct

A

A code of ethics for producers that results in penalties if broken.
conflict of interest, supplying info, requesting gifts to complete business.

27
Q

4 elements of a contract

A
  1. agreement = offer + acceptance
  2. Consideration
  3. Competent Parties
  4. Legal purpose
28
Q

Agreement offer and acceptance

A

The applicant makes the offer when submitting the application. The insurer accepts when the underwriter approves the application.

29
Q

Consideration

A

The binding force in the contract and must be something of value exchanged by each party.

30
Q

Competent Parties

A

must be Legal age, mentally competent, not influenced by drugs or alcohol

31
Q

Legal Purpose

A

must be aligned with the laws. In this case, must have insurable interest and consent.

32
Q

Aleatory

A

Unequal exchange of value like small premiums in comparison to a big payout in event of a loss.

33
Q

Adhesion

A

take it or leave it contract drawn up by the insurer.

34
Q

Unilateral

A

One party is bound to a legal responsibility (insurer must pay insured in even of a loss)

35
Q

Conditional

A

Conditions that must be met by the policy owner….provide proof of loss and pay premium.

36
Q

Ambiguities in contract

A

interpreted to favor the insured.

37
Q

Reasonable expectations

A

implied provisions of insurance through speech or ads that the insured could reasonably expect. Large print vs small print. Large print wins.

38
Q

Indemnity

A

reimbursement to the insured or beneficiary

39
Q

Utmost good faith

A

No fraud between parties. No concealment, misrepresentation, or between parties.

40
Q

representations

A

statements believed to be true by the insured while filling out an application. Untrue statements are considered misrepresentation and could void a contract.

41
Q

Material misrepresentation

A

intentional fraud statements that if discovered would alter a contract.

42
Q

Warranties

A

Absolute true statements that the validity of the insurance policy depends upon.

43
Q

Concealment

A

Intentionally withholding info by an applicant

44
Q

fraud

A

intentional misrepresentation of a fact.

45
Q

waiver

A

voluntarily relinquishing a legal right

46
Q

Estoppel

A

legal stopping of a right once it has been waived

47
Q

Fair Credit Report Act

A

Procedures must be followed so that records are confidential and properly and truthfully used. Protects consumers from inaccurate info circulating.

48
Q

consumer reports and investigative consumer reports

A

outside sources that give additional info about a particular risk used by underwriters to determine risk of loss.

49
Q

consumer report

A

info regarding consumer’s character from public sources, including cret score.

50
Q

investigative consumer report

A

info obtained through interviews of friends that give the reputation of a consumer. Must be known to the consumer in writing within 3 days of the report was requested. unlawful obtaining of this info could result in 2 years imprisonment. Consumers can request addition info about the report and it will be provided within 5 days

51
Q

NAIC

A

organization of Insurance commissioners from all 50 states and 4 US territories that exist to resolve insurance regulation problems.

52
Q

NCOIL

A

conference of insurance legislators that help make insurance decisions affecting their scope of focus.

53
Q

Producer associations

A

shares research for their area of expertise and are created for agents or producers in the same industry of insurance.

Life Insurance (2 decks)

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