Types of Insurers Flashcards
Government insurers (social insurance)
- Non-profit
- Mandatory participation
- Benefits prescribed by law
- Designed to meet needs of general public
- Government has monopoly
- Ex.: FEMA, Medicare, Social Security, FDIC
Private insurers
-Sell insurance based on consumer preferences
-Offer a wide variety of insurance products
-Typically exist to generate a profit or benefit a group
-Insured party voluntarily participates
Ex.: TIAA-CREF, Safe Auto Insurance Company, Colonial Life and Accident Insurance Company, Geico, State Farm, American Family, Aetna, Fidelity, AARP, The HArtford, Allstate, Farm Bureau, Liberty Mutual.
Stock Insurance Companies
- Always for profit
- Usually publicly-traded
- Stockholders provide capital and participate in profits or losses
- “Non-participating” insurers: no dividends go to policyholders
- Ex.: AFLAC, Allstate, Geico
Mutual Insurance Companies
-Owned by policyholders (no shareholders)
-Policyholders elect board of directors
-“Participating” insurers: policyholders participate in dividends
Ex.: Nationwide, New York Life, State Farm
Re-Insurer (insurer that provides insurance for other insurers)
- Insurer buys insurance to reduce its exposure to loss
- The re-insurer pays a percentage of the insurer’s losses, or any losses over a certain amount.
Reciprocal Insurer (group of people or organizations that insure each other)
- Unincorporated
- Non-profit
- Operated by an attorney-in-fact
- Members pay into individual accounts
- Cost of claims share by whole group
Fraternal Benefit Societies (aka: Fraternal Associations)
- Non-profit, mutual aid organizations
- Engage in charitable activities
- Provide some types of insurance to members
- Typically consist of people with similar religions, ethnicities, or occupations
- Used to fund altruistic activities
- Must be assessable by law
- Members are both providers and recipients
- If claims payment ability is impaired, members help pay the difference
Self Insurance
Set aside money to protect against potential losses rather than pay premiums.
Captive Insurers
- Created by business in order to retain risks
- Exist to provide insurance only for their “parent” company
- All profits belong to the parent company
- Permitted in some states
Risk Retention Groups
- *-Owned by their members who assume the risks an share profits
- Provide commercial liability insurance (other than workers’ comp)
- *-Members must be involved in similar business endeavors
- Don’t need to be licensed in multiple states
- Ex.: United Educators (UE), Alliance of Non-profits for insurance (ANI)
- *-1970s commercial liability expensive and difficult to find…led to:
- Product Liability Risk Retention Act of 1981 and Federal Liability Risk Retention Act of 1986…which led to:
- Authorization of RRGs so members could write their own liability coverage.
Domestic Insurer
Located in a particular state, abides by that state’s law.
Foreign Insurer
Obeys a state’s or U.S. laws, but can be located elsewhere.
Alien Insurer
Obeys laws of another country altogether.
Surplus Lines (Standard, or admitted, insurance carrier)
Licensed by state to sell specific lines of insurance, who must contribute to a state insurance guaranty fund.
State Insurance Guaranty Fund
An association that protects policyholders if the insurer becomes insolvent.
