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Health Ins 101 B
Health Insurance Introduction Cont
| Term | Definition |
|---|---|
| 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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