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Licensing C & P Unit 1 Principles of Insurance > Unit 3 > Flashcards

Unit 3 Flashcards

1
Q

stockholders own…

A

stock companies

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2
Q

a mutual insurance company is owned by

A

holders policy

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2
Q

reciprocals

A

give and take (attorney-in-fact)

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3
Q

reciprocal can also mean

A

to share

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4
Q

Lloyd’s association

A

Lloyd’s of london is not an insurance company, is a voluntary association of individuals who agree to share in insurance contracts

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5
Q

syndicate also means…

A

individual (can be responsible for amounts of insurance they write)

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6
Q

self-insurance

A

part or all of the risk of loss is borne without the benefit of insurance coverage to fall back on if a loss occurs

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7
Q

another way of classifying insurance companies is by…

A

the type of insurance policies they write

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8
Q

there are four broad categories or lines of insurance:

A
  • property
  • casualty
  • life
  • health and disability
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9
Q

mono-line company

A

insurance company that only one line of insurance is referred to

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10
Q

multi-line company

A

insurance company that writes more than one line of insurance

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11
Q

property insurance

A

many types of insurance designed to handle property risks (risks that we will suffer financial loss because something we own is damaged or detroyed)

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12
Q

the insurance agent who represents the insurance company is…

A

the direct link between the company and its insureds

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13
Q

the agent is responsible for…

A

field underwriting each risk

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14
Q

the agent may prepare a quotation means

A

will show the prospect what the premium for the proposed coverage will be

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15
Q

the agent completes a detailed application means

A

when the prospect buys, the agent will then fill this out

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16
Q

an agent should maintain a…

A

suspense or diary system that alerts the agent prior to the time of policy renewal

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17
Q

at any time during the policy year, the agent must be available to assist the insured with

A

service needs

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18
Q

agents who are negligent in meeting their responsibilities may be liable for

A

their inadvertent errors… errors and omissions insurance

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19
Q

an agency relationship exists when…

A

one party (an agent) is authorized to act on behalf of another (a principal)

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20
Q

in insurance business, the principal is

A

the insurance company and the agent is a person authorized to act on the company’s behalf

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21
Q

principals grant…

A

certain powers or authority to their agents

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22
Q

the knowledge of the agent is held to be…

A

the knowledge of the principal

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23
Q

three levels of agent authority

A
  • express authority
  • implied authority
  • apparent authority
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24
Q

express authority

A

specifically given to an agent orally or in writing by the principal

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25
Q

written authority

A

usually provided through agency agreement that allows agent to countersign issue and deliver policies and provide other customary services on all contracts accepted by the insurer from the agent

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26
Q

implied authority

A

given by insurance company to the agent that is not formally expressed or communicated

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27
Q

apparent authority

A

doctrine that holds that an agent may have whatever authority a reasonable person would assume they have

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28
Q

in the public’s eye, an agent acting under apparent authority…

A

binds the company as fully as under expressed or implied authority

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29
Q

exclusive or captive agency system

A

insurance company contracts with agencies which are independent businesses to represent and sell insurance only for that insurance company

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30
Q

direct writer system

A

insurance company’s agents are actually employees, may receive a salary/be paid by commission or combination of both

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31
Q

direct response system

A

there are no agents, companies sell through direct mail or over the phone

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32
Q

independent agency system

A

agencies that are independent contractors contract with several different companies to represent and sell insurance for those companies

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33
Q

solicitor

A

like an agent sells insurance and may even be authorized to collect premiums

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34
Q

a solicitor cannot…

A

issue or countersign policies (only an agent can do this)

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35
Q

both agents and solicitors (client) represent…

A

the insurance company

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36
Q

broker

A

represents the insured

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37
Q

excess or surplus lines

A

highly specialized insurance coverages (auto racing liability and tuition refund insurances) that are often not available from any company admitted to do business in a state

38
Q

excess or surplus lines agent

A

agent licensed by the state to handle the placement of such coverages with non admitted companies (ones that are not authorized to conduct business in the state under ordinary circumstances)

39
Q

consultant

A

someone who for a fee offers advice on the benefits advantages and disadvantages of various insurance policies, they don’t sell insurance they sell advice

40
Q

loss ratio

A

used to compare the company’s operations from year to year, shows percentage of losses the company incurred for every dollar of earned premium

41
Q

an agent should maintain a…

A

suspense or diary system

42
Q

a suspense or diary system can be used to

A

alert agents prior to the time of policy renewal

43
Q

at any time during the policy year the agent must be available to assist the insured with

A

service needs

44
Q

service needs examples

A

name change or change in the method of premium payment, maintain accurate records of all changes requested by insured

45
Q

agents who are negligent in meeting their responsibilities may be liable for

A

their inadvertent errors

46
Q

errors and omissions insurance

A

should be purchased by agents to protect themselves against legal liability arising from inadvertent errors or omissions

47
Q

earned premi um

A

premium the company actually earned by providing insurance protection for the designated period of time (need to know formula)

48
Q

underwriting

A

process of selecting certain types of risks and rejecting others so the insurance company will have a book of business that will product the company’s desired results

49
Q

underwriting department

A

made up of many individual underwriters who make the decisions about whether to accept or reject the applications sent in by agents based on the company’s standards and their own judgement

50
Q

policy analyst/screener

A

make sure all information is correct and complete

51
Q

actuaries

A

determine the rates to be charged for various types of insurance

52
Q

reinsurance department

A

insurance companies often purchase insurance to cover their own exposure to loss, helps protect insurance companies from catastrophic losses and from wild fluctuations in underwriting results

53
Q

who regulates insurance in KY?

A

kentucky department of insurance

54
Q

state insurance regulation is at what level?

A

state level

55
Q

it is the states that regulate insurance business that is

A

conducted within their boundaries

56
Q

insurance department

A

each state has this, headed by official charged with responsibility for controlling insurance matters within that state

57
Q

what are these officials called?

A

directors, superintendents, commissioners of insurance

58
Q

in KY they have…

A

a commissioner

59
Q

the commissioners of each state make up the…

A

national association of insurance commissioners (NAIC)

60
Q

the NAIC’s recommendations are generally followed despite nonbinding on individual states because

A

they want to provide uniformity

61
Q

a company that meets the insurance department’s standards and is authorized to do business in a state is called…

A

an admitted or authorized user

62
Q

an insurance company no authorized to do business in a state is a

A

non admitted or unauthorized insurer

63
Q

one of the duties of an insurance department is to

A

determine which insurance companies will be allowed to do business in the state

64
Q

a non admitted insurer may only do business where?

A

in the state under special circumstances

65
Q

within its home state, an insurance company is known as a…

A

domestic company

66
Q

within states other than the state in which is it incorporated, an insurance company is a

A

foreign company

67
Q

a company that is incorporated in a country other than the united state, but doing business in the states, is known as an

A

alien company

68
Q

along with examining and authorizing companies to conduct business within the state, state insurance keeps a close watch over…

A

the financial health of all companies doing business within its boundaries

69
Q

several companies rate the financial strength of insurance carriers based on

A
  • company’s claims experience
  • investments performance
  • management
  • other factors
70
Q

organizations that rate financial strength examples

A
  • A.M. Best (important best there is)
  • Standard & Poor
  • Best’s
71
Q

in addition to licensing the state is responsible for

A

the way agents conduct business within the state

72
Q

state insurance codes are very specific about the…

A

standards agents must meet

73
Q

important terms in the many types of laws governing agent conduct

A
  • fiduciary
  • misrepresentation
  • twisting
  • rebating
  • unfair discrimination
74
Q

fiduciary

A

person who stands in special relationship of trust to another person

75
Q

misrepresentation

A

agents may not misrepresent or falsely advertise the terms of benefits of a policy or the financial condition of the company

76
Q

twisting

A

form of misrepresentation where the agent convinces the client to cancel already-existing insurance and buy another policy from the agent, to the detriment of the insured is illegal

77
Q

rebating

A

giving or offering some benefit other than those specified in the policy (such as cash, gifts, or securities) in to induce a customer to buy insurance

78
Q

unfair discrimination

A

unfairly discriminate against insureds, insured cannot be given a lower or higher rate than another insured in identical circumstances, agent cannot accept a bribe from a client to provide insurance or lower the premium

79
Q

ratification

A

performed by state insurance, approval, of policy forms endorsements and rates used by companies doing business in their states

80
Q

prior approval states

A

insurance company must obtain official approval before using new forms and rates

81
Q

open competition states

A

state allows companies to compete openly with the forms and rates they select

82
Q

in some states for some lines of insurance the use of unique state forms or rates may be

A

mandatory

83
Q

rates

A

basic charges an insurance company sets for various types of insurance

84
Q

when a company establishes a rate it will use, it…

A

calculates a rate that will be adequate to pay cost of losses that will have to be paid, cost of conducting the business, a small profit

85
Q

service bureaus

A

assist insurance company in collecting statistics, organizations made of individual insurance companies gather pool and analyze statistics from all of the member companies

86
Q

loss costs

A

bureau establishes based on combined figures and files them with individual states

87
Q

member companies may use ______________ to establish finished rates

A

loss costs combined with factors covering their own expenses and profit margins

88
Q

insurance services office

A

one of the largest services bureaus, referred to as ISO

89
Q

ISO files…

A

both loss costs and standardized forms on behalf of its member companies

90
Q

reported violations must be…

A

investigated with appropriate penalties assessed

91
Q

violations can result in…

A

fines, license suspension or revocation, suspension or revocation of a company’s authority to do business in the state and in some cases imprisonment (except imprisonment commissioner of insurance can’t imprison someone)

92
Q
A

Licensing C & P Unit 1 Principles of Insurance (7 decks)

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