Unit 4 From Movie Flashcards
How does a new insurance policy get issued?
Prospective insured apply to insurance co. Agent and applicant fill out application form then forwarded to insurance co.
What is a binder?
Oral or written statement made by the agent for immediate but temporary insurance coverage until a policy issued. Does not guarantee policy will be issued
(coverage under binder expires when new policy kicks in or if there’s a formal cancellation or applicant’s policy is rejected)
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What do underwriters use besides an application to help them evaluate the risk (and to accept the person’s application)?
- Inspection services
- Govt bureaus (like DMV, etc)
- Insurance industry bureaus (like automated property loss underwriting system)
- Financial info services (Standard and Poor’s)
- Previous insurers
- The company’s own claims files
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What is the Fair Credit Reporting Act?
Credit reports = consumer reports. report credit standing, personal character, reputation, habits and lifestyles.
- This act protects consumers by requiring that they be notified - can get outdated and inaccurate info deleted and make sure credit reporting agencies are impartial, fair and responsible.
What is Adverse Selection?
Tendency for people with a greater-than-average exposure to loss to purchase insurance.
Insurance co may experience large financial losses and decreased profit.
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What is Judgment Rating?
Oldest form of determining rates. Insurance premiums decided on individual risk. No books or tables, just careful judgment.
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What is Manual or Class Rating?HOw they determine premium
Most prominent form of determining premiums
Uses consulting manuals
- Rate per unit x number of units = premium
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What is Experience rating?
a form of merit rating
- based on the insured’s “loss experience” ($ paid in claims vs premiums paid) typically over the previous 3 years (prior to current policy year)
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What is a certificate of insurance?
Proof that the policy has been written
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What is Misrepresentation?
misstatement (verbal or written) of facts that insurers use to decide to accept policy application
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what is a material fact?
A fact that would cause an insurer to decline a risk, charge a diff premium or change policy provisions.
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What is Fraud?
Deliberate, intentional misrepresentation that causes harm to another party
- It is always intentional whereas misrepresentation can be unintentional
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What are Representations?
statements on insured’s insurance application
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What are Warranties?
specific agreements between insured and insurance co. that certain conditions will be met
(i.e. if company wants insurance, may need to stipulate that a guard will be on duty at all times)
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Define “estopped”
prevented
