Lightning Facts Chapter 1 Flashcards
State Commissioner
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
stock insurance company
issues non-participating policies and is owned by stockholders who
received taxable corporate dividends as a return of profit
mutual insurance company
issues participating policies and is owned by the policyholders
who receive non-taxable dividends as a return of unused premium
Reinsurance
the transfer of risk between insurance companies. The reinsurer assumes some or all of the risk of the ceding, or primary, insurance company.
Domicile
refers to the state in which an insurer is incorporated
domestic insurer
organized under the laws of the resident state
foreign insurer
organized under the laws of another state
within the United States
alien insurer
organized under the laws of a country outside the U.S
admitted insurer
authorized to do insurance business in the state and is issued a Certificate of Authority by the state’s Department of Insurance
underwriting department
responsible for the selection of risks to
insure and determines the rate to be charged
agent/producer
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
Independent agent
retains ownership of their books of business
Law of Agency
three-party relationship where a Principal authorizes an Agent to act on
its behalf to create a legal relationship with a Third Party
Express authority
written into the producer’s agency contract
implied authority
that which
the public assumes the agent possesses
apparent authority
created when the agent
exceeds express authority and the insurer does not respond
Fair Credit Reporting Act (FCRA)
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
risk
the uncertainty/chance of a loss
peril
the cause of loss
hazard
increases the probability of a loss. The 3 types of hazards are physical, moral, and morale.
principle of indemnity
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
Insurable interest
property and casualty insurance must exist at the time of the loss
Contract of Adhesion
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
underwriting factors
determine premium; include the nature of the risk, hazards,
claims history, and other factors that vary depending upon the risk
Speculative Risk
Chance of loss, no loss, or gain
Pure Risk
Chance of loss or no loss. No gain. Only pure risk is insurable.
STARR
Sharing. Transfer. Avoidance. Reduction. Retention.