R.M. Ch. 5

Question 1

Stock Insurer

Answer 1

is a corporation owned by stockholders

• earn profits for stockholders
• stockholders elect board of directors
• stockholders bear all losses
• may pay dividends to stockholders

Question 2

Mutual Insurer

Answer 2

is a corporation owned by the policyowners

• elect board of directors but who appoint executives
• may pay dividends to policyowner

Question 3

Types of mutual insurer

Answer 3

• advance premium mutual

- assessment mutual

Question 4

Advance Premium Mutual

Answer 4

is owned by the policyowners; there are no stockholders, and the insurer does not issue assessable policies

Question 5

Assessment Mutual (not common)

Answer 5

has the right to assess policyowners an additional amount if the insurer’s financial operations are unfavorable

Question 6

Captive Insurer

Answer 6

is an insurer owned by a parent firm for the purposes of insuring the parent firm’s loss exposures.

Question 7

Agent

Answer 7

is someone who legally represents the principal and has the authority to act on the principal’s behalf

Question 8

Property & Casualty Agent

Answer 8

• have binding authority
• paid primarily by commission
• dominate personal lines insurance

Question 9

Independent Agents

Answer 9

• represent several insurers

- paid by commission

Question 10

Exclusive Agents

Answer 10

• represent only one insurer

- Paid by commission

Question 11

Broker

Answer 11

is someone who legally represents the insured

• no binding authority
• paid by commission (from insurers) and fees (from clients
• dominate commercial insurance lines