Lightning Facts Chapter 1

Question 1

State Commissioner

Answer 1

Supervisor, or Director of Insurance is the chief insurance regulator
who protects the insuring population by regulating all insurers and insurance professionals doing
business in the State

Question 2

stock insurance company

Answer 2

issues non-participating policies and is owned by stockholders who
received taxable corporate dividends as a return of profit

Question 3

mutual insurance company

Answer 3

issues participating policies and is owned by the policyholders
who receive non-taxable dividends as a return of unused premium

Question 4

Reinsurance

Answer 4

the transfer of risk between insurance companies. The reinsurer assumes some or all of the risk of the ceding, or primary, insurance company.

Question 5

Domicile

Answer 5

refers to the state in which an insurer is incorporated

Question 6

domestic insurer

Answer 6

organized under the laws of the resident state

Question 7

foreign insurer

Answer 7

organized under the laws of another state

within the United States

Question 8

alien insurer

Answer 8

organized under the laws of a country outside the U.S

Question 9

admitted insurer

Answer 9

authorized to do insurance business in the state and is issued a Certificate of Authority by the state’s Department of Insurance

Question 10

underwriting department

Answer 10

responsible for the selection of risks to

insure and determines the rate to be charged

Question 11

agent/producer

Answer 11

can be the employee of an insurance company that owns the agent’s book
of business, or an independent agent that enters into agency agreements with more than one
insurance company

Question 12

Independent agent

Answer 12

retains ownership of their books of business

Question 13

Law of Agency

Answer 13

three-party relationship where a Principal authorizes an Agent to act on
its behalf to create a legal relationship with a Third Party

Question 14

Express authority

Answer 14

written into the producer’s agency contract

Question 15

implied authority

Answer 15

that which

the public assumes the agent possesses

Question 16

apparent authority

Answer 16

created when the agent

exceeds express authority and the insurer does not respond

Question 17

Fair Credit Reporting Act (FCRA)

Answer 17

protects consumer privacy by ensuring that any data
collected by an insurer remains confidential, and is accurate, relevant, and used for a proper and
specific purpose

Question 18

risk

Answer 18

the uncertainty/chance of a loss

Question 19

peril

Answer 19

the cause of loss

Question 20

hazard

Answer 20

increases the probability of a loss. The 3 types of hazards are physical, moral, and morale.

Question 21

principle of indemnity

Answer 21

does not allow the insured to profit from a loss; instead, it restores
the insured to the same financial or economic condition that existed prior to the loss

Question 22

Insurable interest

Answer 22

property and casualty insurance must exist at the time of the loss

Question 23

Contract of Adhesion

Answer 23

one party (the insurer) prepares the contract and presents it to the second party (the insured), who must accept it on a “take-it-or-leave-it” basis

Question 24

underwriting factors

Answer 24

determine premium; include the nature of the risk, hazards,

claims history, and other factors that vary depending upon the risk

Question 25

Speculative Risk

Answer 25

Chance of loss, no loss, or gain

Question 26

Pure Risk

Answer 26

Chance of loss or no loss. No gain. Only pure risk is insurable.

Question 27

STARR

Answer 27

Sharing. Transfer. Avoidance. Reduction. Retention.