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Health Ins 101 B

Health Insurance Introduction Cont

TermDefinition
Adverse Selection Risks that have a greater than average chance of loss.
Reinsurance an insurance company (the ceding company) paying another insurance company (reinsurer) to take some of the company's risk of catastrophic loss.
Facultative Reinsurance The reinsurer evaluates each risk before allowing the transfer
Treaty Reinsurance The reinsurer accepts the transfer according to an agreement called a treaty.
Stock Insurer Publicly owned by stockholders/shareholders; company makes money a taxable dividend from profits may be paid to the stockholders; non-par policies.
Mutual Insurer Owned by policyholders (customers); if company is profitable, can return excess premium to its policyholders - nontaxable dividend; par policies.
Fraternal Insurer Provides insurance and other benefits; must be a member of the society to get the benefits.
Reciprocal Insurer Unincorporated; members are assessed the amount they have to pay if a loss to any member of the group occurs; run by an attorney-in-fact.
Lloyd's Association insurance provided by individual underwriters not companies
Risk Retention Group Liability insurance company created for and owned by policyholders from the same industry i.e. car dealers RRG - only car dealers can be policyholders
Risk Purchasing Group A group of businesses from the same industry joining together to buy liability insurance from an insurance company. RPG is NOT the insurance company.
Self-Insurance a business that pays its own claims
Residual Market Insurance from the state or federal government
Domestic Insurance state where company is incorporated
Foreign Insurance any state or US territory other than the state where incorporated
Alien Insurance incorporated in any country other than USA
Certificate of Authority state license for an insurance company
Admitted/Authorized state requires the insurance company to have a Certificate of Authority
Non-Admitted/unauthorized insurance company not required to have a Certificate of Authority from the state
Surplus Lines Insurance sold by unauthorized insurers; can only be sold to certain high risk insureds. Cannot be sold just for a cheaper rate than licensed insurers.
Financial Strength Rating a report card of the company
Methods of Marketing Independent, Exclusive/Captive, General Agents/Managing General Agents, Direct-writing companies, Direct Response
Independent Insurance Agents Sales made by agents/producers who represent more than one company.
Exclusive or Captive Agents only sale for one company (insurer)
General Agents (GA) or Managing General Agents (MGA) recruits other agents in a certain area who actually sell the insurance to the customer
Direct-writing Companies they sell insurance through salaried employees of the company
Direct Response No agent/producer involved; customer sees Ad
Agency Insurance agent acts on behalf of the principal (Insurance Company)
Types of Agent Authority Express, Implied, Apparent
Express Agent Authority What the agents written contract with the company says
Implied Agent Authority Not written but are the things agents normally do to sell insurance.
Apparent Agent Authority Things the agent does that a reasonable person would assume as authority, based on the agents' actions and statements.
Fiduciary Person in position of financial trust
Fiduciary-Trust Agent has an obligation to act in the best interest of the insured. Promptly send premiums to insurer; knowledge of products; comply with law and regulations; no commingling.
Elements of a Legal Contract CLOAC - Consideration, Legal purpose, Offer, Acceptance, Competent parties
Consideration (CLOAC) Giving something of value: insured gives information and money (premium) to the insurance company, insurance company gives a promise to pay (policy) to the insured.
Legal Purpose (CLOAC) risk transfer doesn't violate the law
Offer (CLOAC) (made by insurer) Insured submits application and first month's premium to insurer > counteroffer (by insurer) > agrees to issue policy but with higher premium or restrictions/exclusions or insured either accepts the conditions or withdraws application
Acceptance (CLOAC) insurer accepts risk as presented
Competent Parties (CLOAC) insured age 18, and sane.
Adhesion Policy written by insurance company; if not clear - court will take the side of the insured.
Aleatory not equal value - small premium for a large amount of coverage
Utmost Good Faith the insured and insurance company have a right to expect honesty from each other
Unilateral only ONE promise made: insurer promises to pay for a covered loss, insured does not promise to pay the premium.
Personal Contracts Contract between insurer and insured - cannot be changed by someone else.
Conditional Contracts insured must pay the premium for coverage and file a claim if a loss occurs
Indemnity pay for the loss but with no gain - restore insured to their pre-loss financial state.
Representation Believed to be true
Misrepresentation information given that is not true but the correct info would not affect the insurer's decision; doesn't void coverage.
Material Misrepresentation information given that is not true and the correct info would affect the insurer's decision; would void coverage.
Warranty Promise - statement guaranteed to be true.
Concealment Failure to disclose Intentional & Material - coverage could be voided Not intentional - coverage cannot be voided
Fraud intentional act to cheat another
Waiver voluntarily giving up a right
Estoppel actions reasonably relied on by one party can't be denied by the party that accepted same previously
Fraud and False Statements 18 USC Sections 1033 & 1034; Fine and/or imprisonment (10-15 yrs); Embezzlement included
Created by: cmash
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