Life & Health Insurance & Annuities

Question 1

Actuarial Department

Answer 1

calculates policy rates, reserves, & dividends

Question 2

Alien Insurer

Answer 2

in the United States in an insurer whose principal office and domiciled location is outside the country

Question 3

Admitted Insurer

Answer 3

or authorized insurer, is an insurer who has received a certificate of authority from a states department of insurance authorizing them to conduct insurance business in that state

Question 4

Broker

Answer 4

represents themselves & the insured (client)

Question 5

Captive Insurer

Answer 5

insurer established & owned by a parent firm for the purpose of insuring the parent firm’s loss exposure

Question 6

Certificate of Authority

Answer 6

license issued to an insurer by a department of insurance (or equivalent agency) which authorizes that company to conduct insurance business in that particular state.

Question 7

Claims Department

Answer 7

responsible for processing, investigating, and paying claims

Question 8

Divisible Surplus

Answer 8

amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses & general business purposes

Question 9

Domestic Insurer

Answer 9

insurer with its principal or home office in a state where it is authorized

Question 10

Foreign Insurer

Answer 10

insurer with its principal office or domicile location in a state different from the state it is transacting insurance business

Question 11

Fraternal Benefit Society

Answer 11

nonprofit benevolent organizations that provide insurance to its members

Question 12

Industrial Insurer

Answer 12

make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insurers include home service or debt insurer.

Question 13

Insurance

Answer 13

transfer of risk through the pooling or accumulations of funds

Question 14

Insured

Answer 14

customer receiving insurance protection under an insurance policy

Question 15

Insurer

Answer 15

insurance company

Question 16

Lloyds of London

Answer 16

NOT an insurer, but a group of individuals and companies that underwrite unusual insurance

Question 17

Multi-line Insurer

Answer 17

an insurance company or independent agent that provides a one stop-shop for business or individuals seeking coverage for all their insurance needs

Question 18

Mutual Insurance Company

Answer 18

insurance companies characterized by having no capitol stock, being owned by policy owners & usually issue participating insurance

Question 19

Non-admitted Insurer

Answer 19

an insurer who has not a certificate or authority from a state’s department of insurance authorizing them to conduct insurance business in that state

Question 20

Nonparticipating Policy

Answer 20

typically issued by stock companies, do not allow policy owners to participate in dividends or electing the board of directors

Question 21

Participating Plan

Answer 21

an insurance policy under which the policy owners share in the company’s earnings through receipt of dividends and also elect company’s board of directors

Question 22

Private (Commercial) Insurer

Answer 22

companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned

Question 23

Reciprocal Insurer

Answer 23

an unincorporated organization in which all members insurer one another

Question 24

Reinsurance

Answer 24

the acceptance by one or more insurer, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage

Question 25

Reinsurer

Answer 25

company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own & make it possible for insurers to obtain more business that would otherwise be able to

Question 26

Risk Retention Group

Answer 26

a group owned liability insurer which assumes and spread product liability and other forms of commercial liability risk among its members

Question 27

Self-Insurers

Answer 27

establishes a self funded plan to cover potential losses instead of transferring the risk to an insurance company

Question 28

Stock Insurance Company

Answer 28

is an insurance company owned and controlled by a group of stock holders (or share holders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies

Question 29

Surplus Lines Insurance

Answer 29

is nontraditional insurance only available from a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers

Question 30

Underwriting Department

Answer 30

the department within an insurance company responsible for reviewing applications, approving or declining applications, & assigning risk classifications

Question 31

Types of Insurance Companies

Answer 31

insurance companies are typically classified as private/commercial & government. Within these two classes are many categories of insurance providers, as well as insurance plans and insurance producers.

Question 32

Private (Commercial) Insurance Companies

Answer 32

Private companies offers many lines of insurance. Companies that sell more than one line of insurance are known as multi-line insurers. Stock and mutual companies can be both considered commercial insurers, and as such both can write life, health, property and casualty insurance.

Question 33

Stock Companies- Nonparticipating

Answer 33

Private organization, organized and incorporated under state laws for the purpose of making a profit for its stockholders (shareholders). Stock insurance companies issue nonparticipating insurance policies. Nonparticipating insurance policies do not allow policyholders to participate in the companies profits (receive dividends). Nonparticipating insurance policies also do not allow policyholders to participate in electing the companies board of directors. Opposed to passing savings on to policyholders, stock companies look to grow their earned surplus.

Question 34

Mutual Companies- Participating

Answer 34

Organized and incorporated under state laws but they do not have any stockholders. Instead, the owners are policyholders. Customers have the right to vote for members of the board of directors and participate in dividends. Mutual insurers allow their policyowners to share in any company earnings (divisible surplus).

Question 35

Reciprocal Insurers

Answer 35

Organized on the basis of ownership by their policyholders. It is the policyholders themselves who insure the other policyholders’ risks. An attorney-in-fact manages reciprocal insurers.

Question 36

Reinsurers and Retention Limits

Answer 36

Specialized branch of the insurance industry because they insure insurers. Reinsurance is an arrangement by which an insurance company transfers a portion of an assumed risk to another insurer. It occurs to limit the loss any one insurer would face should a very large claim become payable. Another reason for reinsurance is to enable a company to meet specific objectives, such as favorable underwriting or mortality results. The company transferring the risk is called the ceding company. In a reinsurance agreement, the insurance company that transfers its loss exposure to another insurer is called the primary insurer.

Question 37

Service Provider

Answer 37

Sells medical and hospital care services to their subscribers, not insurance, in return for premium payment. Another type of service provider is a health maintenance organization. HMOs offer a wide range of health care services to member subscribers for a fixed periodic premium paid in advance of any treatment. HMOs are known for stressing preventative health care and early treatment programs. The third type of service providers is the preferred provider organization. Under the usual PPO arrangement, a group of desiring healthcare services will obtain price discounts or special services from certain select healthcare providers in exchange for referring its employees or members to them.