The World of Insurance Flashcards
Chapter 1
Who makes up the insurance industry?
Insurers, insurance agencies, insurance agents or producers
What does the NAIC stand for?
National Association of Insurance Commissioners
What does the NAIC do?
provide resources, research, legislative, and regulatory recommendations and interpretations for state insurance regulators. they have no legal authority to enact or enforce insurance laws, and their primary goal is to promote state uniformity
Name the 3 types of insurers
stock insurance company, mutual insurance company, and fraternal insurers
Which of the following insurers is owned by policyholders?
Mutual insurance company
Which of the following insurers is owned by shareholders?
Stock insurance company
Which type of insurer is known as a fraternal benefit society?
fraternal insurer - social organization that provides life insurance to members. nonprofits
What is the domicile?
location or jurisdiction where an insurer is formed or incorporated
what are the three types of domiciles?
alien, foreign, and domestic
Which type of domicile does the insurer have business with the USA but is organized under the laws of another country?
alien
What type of insurer is approved to transact insurance in a given state if it is being granted a certificate of authority from that state’s department of insurance?
admitted or authorized user
what type of insurer is not authorized to transact insurance in a given state, either by failing to comply with state requirements or by not seeking admission?
non admitted or unauthorized user
Which act was passed to detect money laundering?
Patriot Act
Which act protects consumer privacy by ensuring that data collected by companies on a person is confidential, accurate, relevant, and used for proper use?
fair credit reporting act
what does indemnify mean?
to compensate for a loss, or to make one whole again
True or False: Contract law requires that insurable interest must exist at the time of the application, not at the time of the loss.
TRUE
What is the exchange of value that makes a contract binding?
Consideration. this is the payment of premium, along with an agreement to abide by the conditions of the contract. the insurer’s promise to indemnify in the event of a loss is its consideration, as is specific in the insuring clause of the policy.
What are the elements of a legal contract?
consideration, agreement (offer and acceptance), legal purpose, competent parties
Are contracts of adhesion negotiable?
no, insurance is a contract of adhesion, written by one party, the insurance company, without any input from the applicant. presented to applicant on a take it or leave it basis. nonnegtiable
What is an aleatory contract?
contract that is based on an uncertain event, or “by chance” it can’t be known in advance whether the insurer will have to pay a loss during the policy term, or whether the insured will make premium payments without receiving anything in return. Both parties agree to the terms of the contract, despite the uncertainty.
Name the 3 types of contracts?
contract of adhesion, aleatory contract, unilateral contract
Describe the conditional contract
both parties must perform certain duties to make the contract enforceable. the insured can only collect if there has been a covered loss, and the insurer has a list of conditions stated in the contract that must be met before a claim will be paid. as long as the specific conditions or duties are performed, the insurer must pay the claims
what is a representation?
statements written by the applicant on an application, considered to be true
Which type of representation does not affect the acceptance or rating of the risk? Material or Immaterial?
Immaterial representations do not affect the acceptance or rating of the risk
