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FIL 250 Chap 10-14
| Question | Answer |
|---|---|
| actuary | An applied mathematician who is involved in all phases of insurance company operations, but especially ratemaking and establishing reserves. |
| ratemaking | Process by which insurance pricing or premium rates are determined for an insurance company |
| Reinsurance | An agreement by which the primary insurer that writes an insurance policy transfers part of the risk (and premiums) to another insurer (called the reinsurer) |
| ceding company (primary writer) | Insurer that writes the policy initially and later shifts part or all of the coverage to a reinsurer |
| claims adjustor | Person who settles claims: can be an agent, company adjustor, independent adjustor, adjustment bureau, or public adjustor |
| independent adjustor | A claims adjustor who offers services and is hired by insurance companies to help pay claims on their behalf |
| public adjustor | Claims adjustor who represents the insured and is paid a fee based on the amount of the claim settlement; often employed in cases where the insured and insurer cannot resolve a dispute over a claim, or in a complex loss situation |
| Production department | Department where the sales and marketing activities of insurers takes place |
| underwriting | The selection and classification of applicants for insurance through a clearly stated company policy consistent with company objectives |
| Mutual insurer | Insurance company owned by the policy owners, who elect the board of directors. The board appoints managing executives, and the company may pay a dividend or give a rate reduction in advance to insureds. |
| Advance premium mutual | Mutual insurer that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses |
| assessment mutual | Mutual insurer that has the right to collect additional money (above charged premiums) from policy owners for higher than expected losses and expenses |
| agent | Someone who legally represents the insurer, has the authority to act on the insurer’s behalf |
| broker | Often used to help companies find insurance, brokers legally represents the insured. They are still compensated by the insurer who wins the business |
| Agency building system | Including the general agency system and the managerial system, it is used in life insurance by which an insurer builds its own agency force by recruiting, financing, training, and supervising new agents |
| general agency system | Agency building system in which the general agent is an independent businessperson who represents only one insurer and is responsible for hiring, training, and motivating new agents |
| managerial system | Agency building system where branch offices are established and the branch manager is an employee of the company with the responsibility of hiring and training new agents. The expenses of the office are paid by the insurer. |
| demutualization | The conversion of a mutual insurer into a stock insurer |
| direct response system | A method where insurance is sold without the services of an agent; potential customers are solicited by media advertisements |
| fraternal insurer | a type of mutual insurer that provides life and health insurance to members of a social organization |
| Independent agency system | A system in which the agent is an independent businessperson representing several insurers. |
| Lloyd’s of London | World’s leading insurance market that provides services and physical facilities for its members to write specialized lines of insurance |
| Non-admitted insurer | Insurer used only when insurance cannot be obtained from an admitted insurer |
| Reciprocal exchange | an unincorporated mutual in which insurance is exchanged among members and which is managed by an attorney-in-fact |
| stock insurer | An insurance corporation owned by stockholders |
| Non-building agency system | System by which a life insurer sells its products, not by building its own system of agents, but rather through established agents who are already engaged in selling life insurance or similar products |
| Personal producing general agent | An above-average salesperson with a proven sales record who is hired primarily to sell life insurance under a contract that provides commissions |
| Surplus line broker | Specialized broker licensed to place business with a non-admitted insurer |
| Medical information bureau (MIB) | An organization that supplies underwriting information in life insurance to member companies, which report any health impairments of an applicant for insurance |
| policyholder surplus | difference between an insurance company’s assets and its liabilities. Heavily scrutinized by regulators |
| admitted assets | those assets an insurer can show on its statutory balance sheet in determining its financial condition. often quite conservative, meaning that admitted assets are often lower than reported under GAAP |
| alien insurer | Company chartered by a foreign country meeting certain licensing requirements |
| domestic insurer | Company domiciled and licensed in the state in which it does business |
| foreign insurer | Company chartered by one state but licensed to do business in another |
| file and use | Law for regulating insurance rates under which companies are required only to file the rates with the state insurance department before putting them into effect |
| use and file | Law where insurers can put into effect immediately any insurance rate changes, but the rates must be filed with regulatory authorities within a certain period after first being used |
| open competition | Law for regulating insurance rates under which insurers are not required to file rates at all with the state insurance department but may be required to furnish rate schedules and supporting data to state officials |
| guaranty funds | provide for the payment of unpaid claims of insolvent property and casualty insurers |
| Paul v. Virginia | 1868 US Supreme Court case that established the rights of states, and not the federal government, to regulate insurance, ruling that insurance was not interstate commerce |
| South-Eastern Underwriters Association case | 1944 ruling that overturned Paul v. Virginia, finding that insurance was interstate commerce when conducted across state lines and was subject to federal regulation |
| McCarran Ferguson Act | 1945 law stating that continued regulation of the insurance industry by the states is in the public interest and that federal anti-trust laws apply to insurance only to the extent that the industry is not regulated by state law |
| Financial Modernization Act (Gramm-Leach-Bliley) | states that insurers, banks, and investment firms are no longer prevented from competing in other financial markets not in their ‘core’ area of operations |
| NAIC (National Association of Insurance Companies) | a group founded in 1871 that meets periodically to discuss industry problems and draft model laws in various areas and recommends adoption of these proposals by state legislators |
| Rebating | a practice, illegal in virtually all states, of giving a premium reduction or some other financial advantage to an individual as an inducement to purchase the policy |
| twisting | illegal practice of inducing a policyowner to drop an existing policy in one company and take out a new policy in another through misrepresentation or incomplete information |
| risk-based capital (RBC) | Under NAIC standards, insurers are required to have a certain amount of capital that is based on the riskiness of their investments and operations |
| Part A of PAP | Liability coverage - if the driver causes bodily injury or property damage |
| Part B of PAP | Medical payments coverage - if the insured or anyone in the insured's car is injured and incurs medical expenses |
| Part C of PAP | Uninsured and Underinsured motorist coverage. If the other driver is at fault but does not have insurance or has low limits |
| Part D of PAP | Coverage for damage to your auto (collision/comprehensive), plus loss of use |
| Coverage for newly acquired autos | 1) Liability requires notification within 14 days for additional vehicles, but no required notification for replacement vehicles (2) If policy has part D, notification is required within 14 days (3) If no part D, new vehicles get 4 days of coverage |
| split limit of indemnity | part A limits are 1. bodily injury per person, 2. bodily injury per accident, and 3. property damage per accident. In Illinois, the limit is 20/40/15 |
| CDW | collision damage waiver - offered by rental car companies to protect the car while you drive it |
| traditional family | family with two parents, one works outside the home while the other cares for children in the home |
| blended family | two parents, each with their own children, getting married and living together |
| sandwiched family | two generations of obligations - caring for children and your parents |
| human life value | approach to determine the amount of life insurance needed by an individual. it is based on the present value of all future earnings of a worker |
| needs approach | estimates the amount of life insurance needed by individuals. compares family needs after the death of the individual vs actual resources. |
| variable life insurance | fixed premiums whole life insurance. cash values are not guaranteed, but are tied to investment experience directed by policyholders (often stocks). |
| universal life insurance | flexible premium whole life insurance policy. unbundles insurance and savings components so that policyholder can see cost of insurance and investment performance each period. |
| limited pay life insurance | lifetime death benefit, but policy becomes paid up after a certain, after which insurance remains in force without additional future premiums. |
| parties in life insurance contracts | policyowner - retains all rights, insured life - upon death, benefits are paid, beneficiary - receives proceeds upon death of insured |
| specific beneficiary vs. class beneficiary | specific beneficiaries are identified explicitly (for example - by name) in the policy. Class beneficiaries are members of a group (e.g., "my children") |
| options for receiving policy dividends | cash, reduce next premium, accumulate at interest with insurer, paid-up additions |
| nonforfeiture options | how can the policyholder cancel a whole life policy and receive cash surrender value benefits: 1. cash, 2. reduced paid up insurance, and 3. extended term insurance |
| accidental death benefit (double indemnity) | if insured dies as a result of an accident, the policy pays twice the face value |
| accelerated death benefits | allows terminally ill insureds to collect benefits before death |
| life settlement | selling a life insurance policy to someone else |
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