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Oklahoma Insurance Department > Unit 1-General Insurance > Flashcards

Unit 1-General Insurance Flashcards

1
Q

What is Insurance? ✋🏽➡️✋🏽

A

Transfer of risk. 🖐🏽➡️🖐🏽.

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2
Q

What is Risk? ⚠️🏚🤔(think uncertainty..😉)

A

Uncertainty or possibility of a loss
🤔 🏚.

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3
Q

What are the two types of risk? 🎰 ,🚗💥🚗

A

Speculative- chance of loss or gain (gambling is speculative), not insurable.
&
Pure risk- lingering possibility of loss only and is insurable (car accidents are pure risk.)

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4
Q

What is Exposure? 🏢➡️💸 ➡️👨🏽‍🦱
(Think risks that the insurance company could possibly pay out to the insured)

A

Risks for which the insurance company would be liable to pay out to the insured.
&
The formula for exposure is $1000 of a death benefit multiplied by the number of exposure units.

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5
Q

What is Peril? 😱💥🏚💀(think the cause of “misfortune” what’s another word for misfortune? Starts with an L 😉..)

A

A cause of loss.
▪︎death is a peril
▪︎accidents and sickness
▪︎it’s for property &casualty insurance- fire,lighting, etc.

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6
Q

What is Hazard? 📈 ➡️🏚

A

Something that causes an increase in the chance of loss.
▪︎physical hazard( hazard can be seen)
▪︎moral hazard ( a persons true character and being dishonest and faking an accident to get money)
▪︎morale hazard ( careless..e.g. leaving purse in car and its unlocked )

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7
Q

What is S.T.A.R.R. ?

A

Methods of handing risk and the acronym stands for:
S- sharing
T- transfer
A- avoidance
R- retention
R- reduction

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8
Q

What is Insurance? 🏢➡️🏢

A

It’s a transfer of risk, from one insurance to another.

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9
Q

What is a Contract (policy) ? 📃 🖊(think agreement 😉)

A

An agreement between the insured and the insurer.
E.G.-
1st party- insured (customer)
•2nd party- insurer (insurance company)

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10
Q

What is the Law of Large Numbers?(think the larger the group the more accurate losses can be predicted 😉..)

A

The larger the group, the more accurate losses can be predicted.

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11
Q

What is CANHAM? (acronym) 💰

A

-Risks that can be insured.

CANHAM means:
C- calculable
A- affordable
N- non catastrophic
H- homogeneous
A- accidental
M- measurable

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12
Q

What is Adverse selection? 📈🏚

A

Risks that have an increased or greater than average chance of loss.

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13
Q

What is Reinsurance ? 🏢➡️💰🏢📈🏚
(Think putting some of the risk on someone else)

A

An insurance company (ceding company) pays another insurance company (reinsurer) to take some of the company’s risk of catastrophic loss.

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14
Q

What is a Stock Insurer? 💰🏢➡️💰
(Think..stock insurer is a corporation owned by its shareholders.)

A

Public or private company owned by shareholders, who have bought shares in the company that, in the case of a public company, trade on a stock exchange, and they issue non par policies

Definition#2 (Basically publicly owned by stockholders/shareholders and if the company makes money, a taxable portion from the profits may be paid to the stockholders/ shareholders, so they get paid back.
And they issue non-par policies.)

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15
Q

What is a mutual insurer? (Think.. company owned by the policyholders and everyone gets money back if money is made)

A

▪︎The policyholders mutually own the company

• If the insurance company can make money ,excess money can be returned to its customers(policyholders) also a non taxable dividend .
•Owned by the customers(policyholders)
•issues participating policies.

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16
Q

What is a Fraternal Insurer? 📃(think insurance inside a fraternity club 🏫)

A

•Provides insurance and other benefits & you must be a member of the society (fraternity) to get the benefits.

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17
Q

What is a Reciprocal Insurer? (Think.. ran by attorney in fact and spreading the risk within the insurance company)

A

unincorporated groups of people that agree to insure each other’s losses under contract thus spreading the risk within, and it’s ran by an attorney in fact.

(Basically the insurer is not formed into a legal corporation, and the members calculate the amount of money to pay if a loss within the group occurs and its ran by an attorney in fact.)

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18
Q

What is Lloyd’s Association? (Think insurance provided by individual underwriters)

A

Insurance provided by individual underwriters not companies.
(Think Lloyd “wanna provide his own insurance “)

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19
Q

What is a risk retention group? (Think liability insurance for policyholders from the same industry..😉)

A

•liability insurance company created for and owned by policyholders from the same industry.
E.G.- car dealers RRG, only car dealers can be policyholders.

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20
Q

What is a Risk Purchasing Group🏢💰🏢⬅️🏢 (think businesses in the same job field getting liability insurance)

A

A group of businesses from the same industry joining together to buy liability insurance from an insurance company.(another insurance company)
•the RPG is NOT the insurance company.

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21
Q

What is Self Insurance? (Think business pays it’s own claims)

A

A business that pays its own claims.

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22
Q

What is Residual Market? (Think governmental federal or state insurance)

A

Insurance from the state or federal government.

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23
Q

What is Insurance company location? 🏢📍🌎(think acronym D.F.A. for location terms)

A

•Domestic- state where company is located.
•Foreign-any state or U.S. territory other than the state where its located.
•Alien- incorporated in any country other than USA.

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24
Q

What is certificate of authority?( think state licensed insurance company)

A

State license for an insurance company.

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25
Q

What is admitted or authorized? (Hint..both words mean selling something..but sell what?)

A

(Be certified to sale insurance)
State that requires the insurance company to have a certificate of authority.

26
Q

What is Non-Admitted? (Think not needing a license)

A

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

27
Q

What are surplus lines?( think insurance coverage for high risk insureds)

A

Basically it’s insurance sold by authorized/ non admitted insurers- if on the states approved list of surplus insurers.
And surplus lines insurance protects against a financial risk that is too high for a regular insurance company to take on…E.G. casinos, skyscrapers.

Other info:
•can only be sold to certain high risk insureds
•cannot be sold for a cheaper rate than licensed/ admitted insurers.

28
Q

Financial strength rating (think report card)

A

A report card of the company

29
Q

Methods of Marketing (think types of insurance agents - Independent agent•Exclusive agent •General agent•Direct agent•Direct repsonse•
I.G.D.D. acronym) 😉

A

•Independent agent
•Exclusive or captive agent
•General agents or..managing general agents
•Direct agent-writing companies
•Direct repsonse agent- no agent/producer involved.

30
Q

What is Agency? (Think one man acts in behalf of insurance company)

A

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

31
Q

What is Agent authority? (Think levels of authority acronym E.I.A. and the ability to act in behalf of client that binds the client.)

A

The ability of an agent to act on behalf of a client in a way that binds the client.

•E- express
•I-implied
•A-apparent

32
Q

What is Fiduciary Trust?( think sending money to the insurer and knowledgeable of the insuring process and laws and responsible with funds)

A

(Basically send money to the insurer and you have knowledge of the products, you comply with laws and regulations and you don’t mix personal funds with business funds of insured or insurer.)

33
Q

What is Legal Contract (CLOAC)?( think 4 elements to legal contract)

A

•C-consideration
•L-legal purpose
•O-offer
•A-acceptance
•C-competent Parties

34
Q

What is Adhesion?(think policy is like glue)

A

•Policy written by the insurance company.( You must follow “stick” to the policy)
▪︎If ambiguous (not clear)- court will take the side of the insured.

35
Q

What is Aleatory?(think small monthly payment for large coverage)

A

Small premium for a large amount of coverage, not of equal value.

36
Q

What is Utmost Good Faith? (Think expecting honesty)

A

The insured and insurance company have a right to expect honesty from each other.

37
Q

What is unilateral? (Think.. ONE promise by insurance company to pay for a loss 😉)

A

Only ONE promise made and that is
the insurance company PROMISES to pay for a covered loss.
&
ALSO The insured does NOT promise to pay the premium.

38
Q

What is Personal? (Think contracts between insurance party and insured party .. 😉)

A

Contract between the insurance company and the insured- cannot be changed to someone else.

39
Q

What is Conditional? (Think insured must pay for insurance premium and filing a claim if a loss happens..😉)

A

Insured must pay the premium for coverage and file a claim if loss occurs.

40
Q

What is Indemnity? (Think paying for a loss with no gain 😉)

A

Pay for the loss with no gain.

41
Q

What is Representation? (Think believed truth)

A

Believed to be true.

42
Q

What is Warranty? (Think a promise from both parties, insured and insurer 😉)

A

Promise.
•The promise is always made by the insurance company, if the promise to pay is broken, the company could be sued by the insured.
•A promise may be made by the insured as well and if the promise is broken, insured may have no coverage.
•The promise is guaranteed to be true.

43
Q

What is Concealment? (Think intending or unintended)

A

Failure to disclose.(share)
•If intentional, and the info is material (important), coverage could be voided.
• If NOT intentional, coverage cannot be voided.

44
Q

What is Fraud? (Think intentionally scam or cheat)

A

Intentional act to cheat another.

45
Q

What is a Waiver? (Think giving up a right voluntarily 😉)

A

Voluntarily giving up a right.

46
Q

What is an Estoppel? (Think of backpedaling a rule)

A

Prevents an insurance company from adopting a position that is not consistent with a position it took previously.

47
Q

What are Fraud and False Statements?

A

(Basically fraudulent insurance claims)
• A person making false insurance claims in connection with financial reports or documents presented to insurance regulators.

(The results)
•Fine and/or imprisonment (10-15 years)
•Embezzlement included

48
Q

What is Faculative? (Think weigh out the risks before a transfer..😉)

A

The reinsurer weighs each risk before okaying the transfer.

49
Q

What is Treaty? (Think.. an agreement and accepting a transfer)

A

Treaty- the reinsurer accepts the transfer according to an agreement called a treaty.

50
Q

What is Expressed Authority? (Think.. agents written contract of what the company says)

A

•Express- what the agents written contract with the company says.

51
Q

What is Implied Authority? (Think..things that agents normally do to sell insurance)

A

Implied- not written specifically in the insurance policy, but are the things agents normally do to sell insurance.

52
Q

What is Apparent Authority? (Think obvious seniority in decisions)

A

Apparent- things the agent does that a reasonable person would assume as authority, based on the agents actions and statements.

53
Q

What is Consideration? (Think giving something of value)

A

Consideration-giving something of value.
EXAMPLE:
-insured gives info and money(premium) to the insurance company.
-Insurance company gives a promise to pay (policy) to the insured.

54
Q

What is Legal purpose?(think..risk that doesn’t violate the law 😉)

A

Risk that doesn’t violate the law.

55
Q

What is Offer? (Think submitting application! and first months premium to the insurer..😉)

A

•Offer (made by insured)
- Insured submits application and first months premium to insurer.

56
Q

What is Acceptance?(think insurer accepting risk)

A

Insurer accepts risks as presented

57
Q

What is Competent Parties?
(Think legal age of adult and competent)

A

Insured age 18 and sane.

58
Q

What is Misrepresentation?( Think unintentionally giving mixed up info)

A

•Misrepresentation- information given that is not true, however, the correct information would not affect the insurance companies decision, insured mistakenly gives one number of their address wrong, doesn’t void coverage.

59
Q

What is Material Misrepresentation?(Think withholding or lying about important information)

A

Information given that is not true, this information DOES affect the insurers decision- insured has a conviction for driving while intoxicated, that could void coverage.

60
Q

What is a Counteroffer? (Think policy issued by the insurer but with higher premium or restrictions..)

A
  • Counteroffer (made by insurer)
    -Agrees to issue policy but with higher premium or restrictions/exclusions.
    -Insured either accepts the conditions or withdraws their application.

Oklahoma Insurance Department (4 decks)

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