Types Of Insurers Flashcards
Stock Insurance company
Owned by stock/sharholders. Issue nonparticipating policies
Mutual insurance company
Owned by policyholders. Issue participating policies
Reciprocal insurance company
Owned by insurer whose main activity is risk sharing.
Aggregation of individuals, firms, business corporations.
Unincorporated
Fraternal benefit societies
Engage in charitable /benevolent activites that provide insurance.
Primarily life insurance
Domestic insurer
Insurer organized under laws of CA wether or not its admitted to doing business in this state
Foreign insurer
Insurer not organized under laws of CA but in one of other states/jurisdictions within the US, wether or not admitted to do business in the state
Alien insurer
Insurer organized under laws of any jurisdiction outside of US , wether or not admitted to do business in this state
Admitted insurer
Insurance company wether domestic/foreign/alien authorized to carry out business in CA
Non admitted insurer
Not authorized to carry out business in CA
Excess/surplus insurance
This insurance covers types of insurance that cant be obatined from admitted insurance bc risk is too high/difficult to underwrite.
Must be transacted through surplus lines producer/broker
Independent agency
Person who enters into an agency agreement with more than one insurer.
Has ownership of the business written/pays cost of office space
Exclusive agency
Captive Agent
Person under agreement to represent a single insurer or a group of insurers having common ownership.
Brokerage
Broker is a person acting as an intermediary between an insurer and a purchaser on a purchasers behalf to help the client obtain the best price terms and conditions on insurance coverage other than life disability and health insurance
Producers Authority
EXPRESS
Power expressed(written) in the producers contract
Producers Authority
Implied
Authority that the public assumes the producer has
Producers Authority
Apparent
Created when a producer exceeds authority expressed in their contract. (Accepting premiums on lapsed policies)
Three types of binding authorities
Express
Implied
Apparent
Agents responsibilities to insured
Complete the application and submit to insurer for further underwriting
Issuing any binders to applicant that provide temporary insurance coverage until policies is issued
Provide certificate of liability insurance/evidence of property insurance once policy is issued
Gather information/updating policy renewal
Insurance brokers responsibilities
Brokers must understand/assess the clients risks/have knowledge of the insurance market/must place coverage that meets the clients needs.
What is the difference between a broker and agent?
A broker works on behalf of the consumer.
An agent works on behalf of the insurer.
Both agents and brokers have fiduciary duty and must discover info that may affect underwriting and insurability.
License surplus lines brokers are the only producers able to place insurance with nonadmitted insurer’s.
Under the insurance information privacy protection act anyone who obtains info about an individual from an insurance company under false pretenses is subject to a penalty?
A fine up to 10,000 imprisonment up to one year or both
HIPAA Disclosures
This act applies to the business of insurance before and ensure may obtain an applicants health records from a physician or hospital the applicant must be informed
what kind of info may be obtained ,how it will be used ,and home to me it be disclosed
CCPA ( california consumer privacy act 2018)
CCPA gives consumers
- the right to know about personal info businesses collect about them/know how the info is used and shared
- The right to delete personal info
- The right to opt out of sale and personal info
- The right to non-discrimination for exercising these right
Californias Shine the light act establishes disclosure requirements for
Categories of personal information shared with third parties and used for direct marketing purposes
Gives the consumer the right to opt out
Fair credit report act
Protects the consumers right to privacy regarding the collection practices/use of consumer credit reports
Violent crime controk / law enforcement act 1994
Federal regulation that includes a prohibition against anyone who has committed felonies involving dishonesty/breach of trust from being employed in the insurance/financial services industry
Insurance info & privacy protection act
Establish standards for collection,use ,preservation ,and disclosure of info relevant insurance transactions.
Notice of info practices must be delivered prior to or at time of policy delivery when personal info is collected from a source other than the applicant not later than the policy renewal.
Satisfactory notice been delivered in previous 24 months repeat notice not required
Cali financial info privacy act
Adds cali specific regulations to fed Gram Leach Billy act to predict protect consumers and sharing of non-public personal financial info
Privacy nonpublic personal info
Priv protection policy specific to insurers agents and insurance support organizations regarding the collection and disclosure of non-public personal financial info.
Priv policies must be provided one customer relationship is established (annual)
Speculative risk
Possibility of loss, no loss, or gain
Pure risk
A possibility of loss or no loss : no possibility for gain
Insurance is designed to protect against only pure risk
Peril is
The specific cause of a loss
a policy insurance against
Property loss/damage destruction or theft personal prop
 liability loss/losses arising out of negligence
Human or personal loss/death illness or unemployment
 Personnel loss/ loss of key employee due to death or disability
Types of risk management
Avoidance reduction retention sharing Transfer
Insurable risks
Law of large numbers Calculable Measurable Affordable Accidental in nature
Catastrophic perils excluded(war,buclear hazard,illegal operations)
Insurable events
Any event which may cause loss or damage to a person having an insurable interest in the event
Underwriting
The process of selecting, classifying ,and rating a risk for the purpose of issuing insurance coverage.
The insurance application is the primary source of info about the purchaser needed for the insurer to underwrite a risk and it will become part of the insurance contract
Insurability
The ability of an applicant to me and insurance underwriting requirements
Elements of a legal contract
- competent parties: legal age/beware of actions
2.legal purpose: insurable interest must exist/no illegal purposed - Agreement: offer & acceptance
4.consideration: what 2 parties Exchange inv value to abide by the conditions of the contract for ex:
Payment of the premium
Ensures promise to idemnify an event of a loss
All insurance contracts must include:
- Parties between whom the contract is made
- Property/or life insured
- The interest of the insured in the property insured if they are not the absolute owner
- The period during which insurance is to continue
- The risks insured against
- A statement of the premium or statement of the bases and rates upon which final premium is to be determined
Contract of adhesion
A contract prepared by one party on a take it or leave it basis
Aleatory contract
contract with an unequal exchange value between parties
Personal contract
A contract specific to the person insured at the time the contract is formed
Unilateral contract
A one sided contract were only one part is legally bound to the contractual obligations
Conditional contract
Both parties are obligated to perform certain duties/follow rules of conduct that make the contract enforceable
rescission
The termination of a contract from the beginning as it had never existed
Can be done if:
 1.material concealment
2. An intentional/fraudulent omission of matters proving the falsity of a warrant
3. Material misrepersentation
4. Violation or warranty
Estoppel
The legal doctrine that prevents the denial of a fact if the fact was admitted to be true by previous action
When evaluating a risk an underwriter examines:
1.The nature of the risk
2.What hazards are present
3.What outside factors might affect the risk
4.What past losses have occurred

 judgment rating
Rates are based on underwriters judgment/experience on an individual basis
Manual rating(class rating)
Rates are based on classes of insureds who have similar exposures. base rates contained in the manual published by insurer are multiplied by the number of units to calculate premium
Merit rating
Combines manual ratings with an analysis of other factors that would not be found in the rate manual.
An insured who takes measures to decrease probability of loss may be rewarded with discounted rate
Loss cost rating
rating organization provides insurers with the portion of rate that does not include provisions for expenses or profit.
Loss cost rating is used for risks for which the insurer may not have enough data to develop the rate
The rating approval method used for the most property and casualty insurance issued in California is
Prior approval method
Meaning rates must be filed with department of insurance and cannot be used until approved
Risk may be
Avoided ,transferred ,or retained in addition to being shared or reduced
Which of the following constitutes an acceptance of an offer?
What the insurer issues a binder
An Insurance policy is a legal contract between how many parties?
2
What happens if an insurer exercises it’s right to rescind(cancel) a policy
It results in a refund of premiums because the contract is not valid
The function of insurance is to protect the insurance assets against…
Loss by insurable perils
A statement is material when
It discloses or lacks disclosure that would change the insurers decision to issue a policy for the same premium
The termination of a contract from the beginning as it never existed as far
 rescission
Insurance policies that contain at least two types of insurance coverage is
Package policy
A fiduciary is
A person holding the funds/property of another in a position of trust.
When a producer or agent collects premiums for the insurer
Monoline policy is
Contains a single type of insurance.
for example monoline policy might only provide coverage for property losses or only cover casualty losses
Consideration is
The term used to describe rights, money ,promises ,and or property exchange between the parties as part of a contract transaction
Agent and broker
An agent represents an insurer
A broker represents the insured
