Study 2: Insurance Categories and Functions Flashcards
what is the primary function of insurance?
Spread risk by sharing the losses of the few among the many policyholders who pay premiums.
explain a contract?
A contract is the agreement enforceable at law, which sets out in detail the arrangements between the insured and the insurer concerning premiums,the contingency insured against and the manner and method of settling losses.
what is a broker?
an independent business person who places business with ANY number of insurers. they usually have a contract or agreement with the insurers they represent. Independent borers are usually paid commission by the insurer. (has client list ownership)
what is a agent?
agents always have a contract or agreement with the insurers they represent depending on the jurisdiction, an independent agent can represent 1 company or up to 3 insurers. usually paid by commission by the insurer. (does not have client list ownership)
what is an exclusive agent/direct writer?
they place business with one insurer only. the insurers they usually represent are known as direct writers. exclusive agents are usually paid a salary by the insurer they work for. (does not own client list ownership)
when a loss occurs, who will the insured deal directly with when arranging the loss settlements?
A staff adjuster.
what is a independent adjuster
a independent business person who may be appointed by the insurer to assist in the loss settlement. (becomes a representative of the insurer)
what is public adjuster?
a independent business person who is engaged by the insured to help settle a claim and look after the insureds interests. usually hired when in dispute with the settlement offered by the insurer.
name the 5 secondary functions of insurance?
1 aid to security #2 aid to credit #3 loss prevention activities #4 source of capital #5 source of employment
what is unearned premium?
the part of the premium that has not been used or earned, premium representing the unexpired portion of a policy.
what is earned premium?
the portion of premium earned or charged for the period of time a policy remained effective.
what is unearned premium reserve?
a reserve fund of an insurance company that represents the unearned premium.
