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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
Q

risk must be non-catastrophic (events that cause widespread simultaneous loss) (CANHAM)

A

N on-castastrophic

26
Q

chance of loss or gain not insurable

A

speculative risk

27
Q

type of risk

consequence of the direct loss

A

indirect

28
Q

dishonesty that intentionally causing a loss is acceptable

A

moral hazard

29
Q

liability insurance company created for policyholders from the same industry
- owned by their members

A

risk retention group

30
Q

activities an agent does that a reasonable person would assume as authority, based on the agents actions and statements

A

apparent authority

31
Q

the reinsurer evaluates each risk before allowing the transfer

A

facultative

32
Q

business formed as a corporation and owned by its stockholders

  • dividend not guaranteed
  • dividend paid to stockholder
  • dividend is taxable
  • issues non-participating polices
A

stock insurer

33
Q

provides insurance and other benefits

must be a member of the society to receive benefits

A

fraternal insurer

34
Q

an insurance company paying another insurance company to take some of the company’s risk
- helps spread insurer’s risk

A

reinsurance

35
Q

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

A

general agents / managing general agents

36
Q

uncertainty/ possibility of a loss

regarding financial loss

A

risk

37
Q

insurance provided by individual underwriters, not companies
insures unusual risks e.g. hole-in-one contest, athletes arm, celebrity’s hair

A

lloyd’s association

38
Q

chance of loss only insurance companies will insure

A

pure risk

39
Q

the hazard can be seen

A

physical hazard

40
Q

insurance that is not ordinarily available

  • war risk
  • flood insurance
  • nuclear energy insurance
  • federal crop insurance
  • unemployment (state level)
  • workers compensation (state level)
A

federal government provides

41
Q

a business that pays its own claims
reserves funds to cover losses
retains risk rather that transfers

A

self- insurance

42
Q

the illegal act of mixing personal funds with the insured’s or insurer’s funds

A

commingling

43
Q

not written, activities an agent normally does to sell insurance

A

implied authority

44
Q

the reinsurer accepts the transfer according to an agreement called a treaty

A

treaty

45
Q

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
A

direct writing companies

46
Q

person in position of financial trust

  • knowledge of products
  • complies with laws and regulations
  • does not commingle funds
  • funds received and held in trust
A

fiduciary trust

47
Q

the insurance agent acts on behalf of the principal (insurance company)

  • relationship
  • authorized to represent
A

agency

48
Q

a report card of the company

A

financial strength rating

49
Q

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
A

exclusive/captive insurance agents

50
Q

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
A

adverse selection

51
Q

reduce
lessening the chance that a loss will occur
STARR

A

R educaiton

52
Q

insurer agrees to pay if an insured has a loss

STARR

A

T ransfer

53
Q

two or more individuals or businesses agree to pay a portion of any loss incurred by any member of the group
STARR

A

S haring

54
Q

retain
individual or business will pay for the loss (if occurs) or portion via deductible
STARR

A

R etention

55
Q

avoid
eliminating a particular risk by not engaging in a certain activity
STARR

A

A voidence

56
Q

type of risk

physical loss

A

direct

57
Q 
an agreement between the insured and the insurer
1st insured (customer)
2nd insurer (insurance company)
A

contract / policy

58
Q

headquarters is in another state

A

foreign

59
Q

carelessness

A

morale hazard

property & casualty (9 decks)

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