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21 Cards in this Set

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  • Back
DIRECT MAIL SYSTEM
- solicitation is handled by mail, phone or internet.
UNDER "THE CODE", WHEN IS AN INSURER DEEMED INSOLVENT?
- if its paid-in capital is below the statutory level.
I.N.B.R. - INCURRED BUT NOT REPORTED
*** TEST QUESTION ***
- amts set aside for losses that have occured but have not yet been reported.
RECIPROCAL COMPANIES (Inter-Insurance Exchange)
- Organized as Associations
- Not incorporated
- Members insure eachother
- Managed by an "Attorney-in-Fact"
- Profits go to Members
EXCLUSIVE AGENCY SYSTEM
- agents only represent one insurer.
- usually paid commission.
MAJOR OPERATING DIVISIONS OF AN INSURER...
MARKETING/SALES - the sale & distribution of insurance products.
CLAIMS - investigates & pays losses.
ACTUARIAL - calculates rates & estimates loss reserves.
UNDERWRITING - selection, classification & pricing of risks.
MUTUAL COMPANIES
- Organized as corporations
- Owned by the Policy Holders
- No Stockholders
- Profits go to Policy Holders in Dividends

EX. State Farm Mutual, Liberty Mutual
DIRECT WRITER SYSTEM
- Insurer owns the book of business.
- Employees are compensated by salary, commission or both.
RISK RETENTION GROUPS
- Ins Co formed by entities
- Provided for & funded by members
- No protection for members it the Company becomes insolvent.
EX. OMIC - formed by Ophthalmologists for malpractice insurance.
Purpose & Members of the CA Insurance Guarantee Association (CIGA)
- MEMBERS - All admitted insurers must be.
- PURPOSE - to protect policyholders & claimants if the admitted insurer becomes insolvent or financially impaired.
RATING METHODS USED TO PRICE INSURANCE COVERAGES...
MANUAL - standard rates apply to all.
MERIT - rates are incrsd/decrsd based on specific charateristics that are likely to affect frequency or severity of losses.
- JUDGEMENT - rates developed by an UW for a particular insured.
INDEPENDENT AGENCY SYSTEM
- Agents who own their book of business.
- Usually represent several insurers.
WITH RESPECT TO SOLVENCY, WHAT IS CONSERVATION?
- When an insurer is insolvent or financially impaired, the Insurance Commissioner may take over its operations & management in attempt to rehabilitate it.
HOW INSURERS ARE CLASSIFIED BY DOMICILE...
1. Domestic - organized under CA laws. (Farmers)
2. Foreign - organized under another states laws. (USAA)
3. Alien - organized outside USA. (Canadian Indemnity)
STOCK INSURERS
- Organized as corporations
- Owned by stockholders.
- Profits go to Stockholders in the form of dividends
Ex. CNA Firemans Fund
U/W TERMS:
1. ADVERSE SELECTION
2. SPREAD OF RISK
1. poor risks w/ greater potential for loss tend to purchase & renew coverage.

2. mix of insureds w/ high, avg & low loss exposure.
NON-ADMITTED INSURER
- Not Lic'd to do biz in CA
- Doesn't hold a Cert of Authority
- Not subject to regulation by the CDI
ADMITTED INSURER
- Lic'd to do business in CA
- Holds a Cert of Authority
- Subject to regulation by CDI
LLOYD'S OF LONDON
- NOT an Insurance Company
- An individual/corporation that accepts premiums in exchange for assuming the risks of others
- Members pledge the full extent of their personal assets to pay cov'd claims.
WHO MAY BE AN INSURER?
Any person that is capable of entering into a contract.
LOSS RESERVES
*** TEST QUESTION ***
- funds set aside by the insurer to pay claims.