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LM Chapter 3

Insurance Company Organization and Regulation

QuestionAnswer
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)
Created by: landonhill
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