Intro to general insurance

Question 1

5 functions of insurance

Answer 1

1. Spread of risk
2. Basis of credit system
3. Eliminates worry
4. Loss prevention
5. Source of employment

Question 2

What is insurance

Answer 2

Shifting of ones financial responsibility

Question 3

Three types of general insurance

Answer 3

Automobile

Property

Liability

Question 4

Organization of insurance (Private)

Answer 4

Stock: private funds though a public sale of stock

Mutual: owned by policy holders, creation of profit is not primary incentive.

Question 5

Organization of insurance ( Government)

Answer 5

Federal and provincial gov. Are involved in providing various insurance.

(Medical, employment, auto…)

Question 6

Distribution types of insurance

Answer 6

Direct writing system

Independent brokerage system.

Question 7

Direct writing system

Answer 7

Employees of the insurer and limited to only selling product of the insurer
Do not own their files.
Salary or commission or combination

Example: hub employees

Question 8

Independent brokerage system

Answer 8

Not employees of the insurers
Can represent more then one insurer
Owns the business
Commission by insurer on all the business it writes (pays salary’s, rent...)
OWN their files.

Question 9

Agency System

Answer 9

The represent one insurer
Paid commission and bonuses for the sale
Small business owners
Own Files.

Question 10

Spread of risk

Answer 10

The losses of few are shared among the many

Question 11

Four other functions of insurance

Answer 11

Payment made in event of happening

Amount of payment determined from amount of insurance purchased

Covers loss to which object is exposed (within limits)

Indemnify - form of payment, money or replacement