exam

Insurance

Transfer of risk from one party to another though a legal contract or the transfer of risk through the pooling (accumulation) of funds

Benefit of Insurance

most contracts offered to individuals and organization in society, including health, property, and casualty policies, are contracts of indemnity whose primary purpose is to pay off financial losses and reimburse the insured

insurance evolved to produce a ___________ to economic uncertainties and losses

practical solution

multi line insurers

companies that sell more than one line of insurance are known as

Stockholders

may or not be policy holders

life insurance

creates an instant estate regardless of when death occurs

two type of insurance companies

Private vs. Gov insurance

A stock insurance company

typically issues nonparticipating insurance policies

nonparticipating policies

do not allow policyholders to participate in board elections or dividends and instead aim to increase profit for the shareholders

what are mutual companies referred to as

participating companies because the policy-owners participate in dividends

Participating policies allow policy holders to ?

participate in the company by electing the board for directors and receiving dividends fro the dividsible surplus

The Divisible surplus

amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes

Pure Assessment Mutual Company

amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes

Reciprocal insurers

organized on the basis of ownership by their policyholders

to be characterized as a fraternal benefit society the organization must be

nonprofit, have a lodge system that includes ritualistic work, and maintain a representative form of government with elected officers

Lloyd's of London

...

company transferring the risk is called the

ceding company

company assuming the risk

reinsurer

Primary insurer

the insurance company that transfers its loss exposure to another insurer

treaty reinsurance

the most common reinsurance between two insurance companies, which involved an automatic sharing of the risks assumed

insurer established and owned by a parent firm for the purpose of insuring the parents firm's loss exposure is known as

captive insurer

surplus lines

nontraditional insurance market

industrial insurance

characterized by relatively small face amounts with premiums paid weekly

Self insurer

establishes a self funded plan to cover potential losses

marketing or sales devisions are responsible for

increasing the number of prospective applicants

sales department

is typically the department completing the application

underwriting department is responsible for

reviewing application, conducting investigations to gain additional information about applicants, assigning risk classifications, and approving or declining an application

claims departed is responsible for

processing, investigating, and paying claim for losses incurred by insureds

Actuarial Department

calculates policy rates, reserves, and dividends and makes other applicable statistical studies and reports focusing on morbidity and mortality tables

in any dispute between the insured or beneficiary and the insurer, the agent who solicits an insurance application represents the

insurer and not the insured or beneficiary

agents are also classified as

captive or career agents and independent agents

career agencies

branches of major stock and mutual insurance companies that are contracted to represent an insurer in a specific area

1868-Paul v. Virginia

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1944- United States v. Southeastern Underwriters Association

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1945 McCarran and Ferguson Act

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1958 intervention by the FTC

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1959 Intervention by the SEC

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1970 Fair Credit Reporting Act

provides individuals private, protection and fair and accurate credit reporting

1994 United States code sections 1033 and 1034

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1999 Financial Services Modernization Act

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2001 uniting and strengthening America by Providing appropriate tools required to intercept and obstruct terrorism act

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2003 do not call implementation act

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2010 patient protection and affordable care act

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agent

a person who acts for another person or entity known as the principal with regard to contractual arrangement with third parties

Express Authority

authority a principal deliberately gives to its agent

Implied Authority

unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal

Apparent Authority

appearance or assumption of authority based on the principal's actions, words or deeds

rating service

in the insurance industry a rating service company primary purpose is to determine the financial strength of the industry insurers

Reserves

accounting measurements of an insurer's future obligations to its policyholders

Liquidity

indicates a company's ability to make unpredictable payouts to policy owners