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
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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