Study 3: Insurance Companies Flashcards
what is a stock company?
they are made by a number of individuals that subscribe and pay in capital to from a corporation. the individuals now become shareholders and have the interest of making profit on their investments (in the form of dividends).
what is outstanding loss reserves?
Funds set aside to pay for losses that have been incurred but not yet paid.
what is paid up capital?
represents that part of subscribed capital that has been paid in full by the shareholders.
stock companies achieve profit from which 2 main sources?
Underwriting gain and Interest on investments.
what is a mutual insurance company?
a form of cooperative enterprise owned by its policyholders, they operate on a strictly loyal basis. ex.(farmers)
what is government insurance?
there is a contract of insurance between the insured and the government. forms of government insurance include: Federal government (operate insurance plans for EI and pensions) Provincial and territorial government (workers compensation like minimum wage and medical plans). provincial governments like Saskatchewan ,BC and Quebec are engaged in writing auto insurance.
What are captive insurance companies?
it is a special type of insurer, can be considered a risk financing mechanism, usually owned by its parent company. purpose of captives is to fund losses.
What is a Lloyd’s Insurance market?
it is not an insurance company but more of a market for specialist insurance and reinsurance risk. The 2 differences from regular insurers is greater capacity and ability to underwrite risks with unique hazards or large loss exposures. (basically insurance for Jlos ass or Ronaldos leg)
what is a syndicate?
a group of companies or underwriters to insure risk in the Lloyd’s insurance market.
what is a coverholder?
a company or individual who has authority to bind specific coverage for a specific line of business as outlined in a contract with an insurer.
what departments are unique to insurance?
Actuarial, Claims and Underwriting.
what is commission?
Compensation based on the amount of production.
what is an actuary?
they’re responsible for analyzing the data and performing the calculations that determine the price of various classes of insurance. they are responsible for basic ratemaking.
what is ratemaking?
The process of compiling and analyzing data to establish rates that accurately reflect the level of risk.
what is the law of large numbers?
the degree of uncertainty is reduced as the number of events increases.
