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Property & Casualty > Unit 1 > Flashcards

Unit 1 Flashcards

Introduction to Insurance

1
Q

a group of business from the same industry joining together to buy liability insurance from an insurance company, not insurers themselves

A

risk purchasing group

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2
Q

situation or factor that increases the chance of loss

A

hazard

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3
Q

transfer of risk from a person or business to an insurer

A

insurance

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4
Q

the larger the group, the more accurately future losses can be predicted

A

law of large numbers

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5
Q

contracts made by the agent are considered to be contracts of the principle

A

law of agency

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6
Q

home office is in another country

A

alien

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7
Q

cause of loss

ex: house burns down = fire

A

peril

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8
Q

insurance sold by unauthorized/nonadmitted insurers if on the states approved list of insurers

  • only be sold to certain high risk insureds
  • cannot be sold solely for a cheaper rate than licensed/admitted insurers
A

surplus lines

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9
Q

to make purchase recommendations that are appropriate, suitable in light of a clients particular needs, objectives, and circumstances
- what solutions can we provide to meet their needs?

A

suitability considerations

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10
Q

state where a company has its headquarters

A

domestic

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11
Q

insurance company not required to have a certificate of authority from the state

A

nonadmitted / unauthorized

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12
Q

individuals that sell the insurance products of several companies and are independent contractors, not employees of the insurers
- own the renewals of the polices they sell

A

independent insurance agents

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13
Q

no agent or producer involved

- policies sold directly to public by : direct mail, television, magazines, internet, radio, newspapers

A

direct response

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14
Q

what the agent’s written contract with the company says

A

express authority

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15
Q

unincorporated, members are required to pay an assessed amount if a loss to any member of the group occurs
managed by an attorney-in-fact

A

reciprocal insurer

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16
Q

state license for an insurance company

A

certificate of authority

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17
Q

state requires the insurance company to have a certificate of authority

A

admitted/ authorized

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18
Q
  • owned by the policyholders (customers)
  • dividend not guaranteed
  • dividend is paid to policyholder
  • dividend is not taxable; considered refund of premium
  • issues participating policies
A

mutual insurer

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19
Q

type of risk
condition or situation that presents the/a possibility of loss
example: auto accident, house fire, lost luggage on a trip, pet biting the mailman, employee hurt on the job

A

exposure

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20
Q

risk must be similar in nature so the same factors affect the chance of loss (CANHAM)

A

H omogenous

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21
Q

premiums must be calculable based upon prior loss statistics for that particular risk in order to predict future losses (CANHAM)

A

C alculable

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22
Q

loss must have been caused due to chance (accident)

- intentional losses not covered (CANHAM)

A

A ccidental

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23
Q

a definite time and place

proof of loss must be established with numbers and dollar amounts (CANHAM)

A

M easurable

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24
Q

the premium for transferring the risk should be affordable for the average consumer (CANHAM)

A

A ffordable

25
risk must be non-catastrophic (events that cause widespread simultaneous loss) (CANHAM)
N on-castastrophic
26
chance of loss or gain not insurable
speculative risk
27
type of risk | consequence of the direct loss
indirect
28
dishonesty that intentionally causing a loss is acceptable
moral hazard
29
liability insurance company created for policyholders from the same industry - owned by their members
risk retention group
30
activities an agent does that a reasonable person would assume as authority, based on the agents actions and statements
apparent authority
31
the reinsurer evaluates each risk before allowing the transfer
facultative
32
business formed as a corporation and owned by its stockholders - dividend not guaranteed - dividend paid to stockholder - dividend is taxable - issues non-participating polices
stock insurer
33
provides insurance and other benefits | must be a member of the society to receive benefits
fraternal insurer
34
an insurance company paying another insurance company to take some of the company's risk - helps spread insurer's risk
reinsurance
35
individuals that hire, train, and supervise other agents within a specific geographical area - earn overriding commissions on the business produced by the agents they manage
general agents / managing general agents
36
uncertainty/ possibility of a loss | regarding financial loss
risk
37
insurance provided by individual underwriters, not companies insures unusual risks e.g. hole-in-one contest, athletes arm, celebrity's hair
lloyd's association
38
chance of loss only insurance companies will insure
pure risk
39
the hazard can be seen
physical hazard
40
insurance that is not ordinarily available - war risk - flood insurance - nuclear energy insurance - federal crop insurance - unemployment (state level) - workers compensation (state level)
federal government provides
41
a business that pays its own claims reserves funds to cover losses retains risk rather that transfers
self- insurance
42
the illegal act of mixing personal funds with the insured's or insurer's funds
commingling
43
not written, activities an agent normally does to sell insurance
implied authority
44
the reinsurer accepts the transfer according to an agreement called a treaty
treaty
45
companies whose products are sold by employees, not independent contractors - producer may be compensated by a salary, commission or both - insurance company owns the renewals of the policies sold on their behalf
direct writing companies
46
person in position of financial trust - knowledge of products - complies with laws and regulations - does not commingle funds - funds received and held in trust
fiduciary trust
47
the insurance agent acts on behalf of the principal (insurance company) - relationship - authorized to represent
agency
48
a report card of the company
financial strength rating
49
individuals that represent only one company - independent contractors, not employees of the insurer - insurance company owns the renewals of the policies sold on their behalf
exclusive/captive insurance agents
50
risks that have a greater- than - average chance of loss - not wanted by insurers - tendency for high-risk individuals to get and keep insurance - why insurers go through the underwriting process - higher risk = high rate or refusal to insure
adverse selection
51
reduce lessening the chance that a loss will occur STARR
R educaiton
52
insurer agrees to pay if an insured has a loss | STARR
T ransfer
53
two or more individuals or businesses agree to pay a portion of any loss incurred by any member of the group STARR
S haring
54
retain individual or business will pay for the loss (if occurs) or portion via deductible STARR
R etention
55
avoid eliminating a particular risk by not engaging in a certain activity STARR
A voidence
56
type of risk | physical loss
direct
57
``` an agreement between the insured and the insurer 1st insured (customer) 2nd insurer (insurance company) ```
contract / policy
58
headquarters is in another state
foreign
59
carelessness
morale hazard

Property & Casualty (9 decks)

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