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FIL 250 Chap 10-14

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
Created by: isufil250
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