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LM Chapter 3
Insurance Company Organization and Regulation
Question | Answer |
---|---|
Type of company that sells stock to stockholders to raise the money necessary to operate the business. | Stock company |
The type of company that the insureds are the owners of the company and profits are returned to the insureds in the form of dividends or reductions in future premiums. | Mutual company |
Type of company that agrees to share the insurance responsibilities with all other members of the unincorporated group. | Reciprocal company |
A reciprocal company is managed by whom? | Attorny in fact |
A vouluntary association of individuals, or groups of individuals, who agree to share in insurance contracts. | Lloyd's Association |
Product manufacturers establish a group of self-insurance programs or group captive insurance companies that are called...? | Risk Retention Groups (RRG's) |
This is when part or all of the risk of loss is borne without the benefit of insurance coverage. | Self insurance |
The federal government provides insurance for (4)? | War risk insurance, Nuclear energy liability insurance, Flood insurance, and Federal crop insurance |
The type of insurance company that writes only one line of insurance. | Monoline company |
Designed to handle property risks that we will suffer a financial loss on because something we own is damaged or destroyed. | Property insurance |
Types of property insurance (6). | Dwelling, Homeowners, Commercial property, Inland marine, Ocean marine, and Crime |
This covers the liability risk which is the risk that we will suffer financial loss as a result of our actions towards others. | Casualty insurance |
Types of casualty insurance (4). | Aviation, Auto, Workers compensation, and Surety bonds |
An insurance agent's (producer) responsibilities (4). | Selling insurance, Issueing and countersigning policies, Collecting premiums, and Providing a link between the insured and the insurance company |
Property and casualty coverage that protects an individual or family. | Personal line |
Coverages designed for businesses. | Commercial line |
This means the agent signs each new policy prepared by the company before delivering it to the insured. | Countersigning |
Insurance that protects against errors and ommissions. | Errors and Omissions insurance |
The authority specifically given to an agent, either orally or in writing by the principle. | Express authority |
The authority given by the insurance company to the agent that is not formally expressed or communicated. | Implied authority |
A doctrine that holds that an agent may have whatever authority a reasonable person would assume the agent has. | Apparent authority |
What are the 4 basic distribution systems for insurance marketing? | Exclusive/Captive Agency system, Direct Writer system, Direct Response system, Independent Agency system |
The insurance company that contracts with agencies which are independent businesses to represent and sell insurance only for that insurance company.(example: State Farm, they buy the office but only sell for that company) | Exclusive/Captive Agency system |
System where the agents are the employees of the insurance company itself. (the company buys the office and employs people to sell their product exclusively) | Direct Writer system |
System where there are no agents and the companies sell through direct mail or by phone. | Direct Response system |
System of agencies where independent contractors contract with several different companies to represent and sell insurance for those companies | Independent Agency system |
Highly specialized insurance coverage such as auto racing liability. | Excess/Surplus lines |
Someone who, for a fee, offers advice on the benefits, advantages, and disadvantages of various insurance policies. | Consultant |
Department that selects certain types of risks and rejects others so that the insurance company will have a book of business that will produce the companys desired result. | Underwriting department |
Department that inspects a loss, determines whether there is coverage for the loss, estimates indemnification, and in some cases, pay for the loss immediately. | Claims department |
Department that determine the rates to be charged for various types of insurance. | Actuarial and Statistical department |
Department that credit premiums to specific accounts, pay commissions to agents, and maintain proper reserves. | Accounting department |
Department that oversees the funds the company needs to invest to make sure adequate funds are on hand to pay claims. | Investment department |
Department that interprets the various state insurance laws and helps the company keep its policies and practices in compliance. | Legal department |
Official charged with the responsibility for controlling insurance matters within the state. | Commissioner of Insurance |
What does the NAIC stand for? | National Association of Insured Commissioners |
An insurance company that is not authorized to do business in a state. | Nonadmitted/Unauthorized company |
Within its home state an insurance company is known as a....? | Domestic company |
Within states other than the state in which the insurance company is incorporated is known as a....? | Foreign company |
An insurance company that is incorporated in a country other than the United States but is doing business in the states is known as an...? | Alien company |
A person who stands in a special relationship of trust to another person. | Fiduciary |
When an agent misrepresents or falsely advertises the terms or benefits of a policy or the financial condition of a company. | Misrepresentation |
A form of misrepresentation in which the agent convinces the client to cancel an already existing insurance policy and buy another policy from the agent to the detriment of the insured. | Twisting |
The giving or offering of some benefit other than that which is specified in the policy, such as cash, gifts, or securities, to induce a customer to buy insurance. | Rebating |
Code where an insured cannot be given a lower to higher rate than another person in identical circumstances. | Unfair descrimination |
This type of company may begin using forms and rates as soon as they have been filed. The state eventually reviews the filing and officially accepts or rejects it. | File and Use |
This type of company states insurers must file the rates and forms within a certain period after they are first issued. | Use and File |
When a company establishes a rate it will use, it calculates a rate that will be adequate to pay what? (3) | The cost of losses that will have to be paid. The cost of conducting the business. A small profit. |
Organization that helps incurance companies collect statistics for establishing rates. | Central Service Bureau |
One of the largest insurance service bureaus. | Insurance Services Office (ISO) |