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39 Cards in this Set
- Front
- Back
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proprietary
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formed for the purpose of earning profit
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stock insurers
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most prevalent proprietary insurer in the us.
owned by stockholders for profit organizations |
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llyods association
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not an insurance co., but a MARKETPLACE
written by or on behalf of members, ins each member writes is backed by his/her personal fortune |
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cooperative
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owned by policy owners
formed to provide insurance protection at a minimum cost |
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mutual insurers
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largest number of cooperative insurers
- owned by policyholders - liability risk transfered to the insurer |
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reciprocal
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liability is transferred to other members of the exchange
- managed by an attorney in fact |
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pools and associations
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group of several insurers join together to insure loss exposures that indiviual insurers are unwilling to insure
- severity risk to high for one insurer - formed voluntarily or to meet statutory reqr. |
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syndicate pool
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all pool members listed and responsible for a portion of the insurance. insured has a contractual relationship with each pool member
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reinsurance pool
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one member issues the policy other members reinsure an agreed proportion of the policy. if a loss occurs contractual relationship is with only the issuer.
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major goals of insurers
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earn profit
meet customer needs comply with legal requirements fulfill duty to society |
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internal contraints
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efficency
expertise size financial resources |
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external constraints
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regulation
public opinion competition economic conditions marketing systems |
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mutual insurers
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non-profit
advanced premium low cost elect board of directors, who hire/fire management profits retained to increase surpus excess returned to policyholders in form of dividends renewal fees to cover losses most have non-assessable policies |
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stock insurers
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for profit
owned by stockholders board of directors capital raised through sale of stock capital saved in retained profit to pay for future losses |
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agents
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represent the company
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brokers
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represent the insured
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exclusive agent
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principal is the insurer
agent works for the best interest of the insurer |
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independent agent/brokerage
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principal is the insured
agent/broker works for best interest of the insured |
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who should regulate insurance
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fed vs. state
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how should rates be set
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controlled by regulation vs. set by market forces
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collaboration among insurers
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required, encouraged, prohibited
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regulatory activities of st. ins. dept.
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approving policy forms
holding rate hearing and rev rate filings licsensing new insurers/producers investigating complaints rehab/liquidating insolvent firms issuing cease/desist orders conducting audits fining insurers |
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arguments for federal regulation
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provide regulatory uniformity
more efficient less expensive higher quality personnel |
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arguments against federal regulation
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state reg- more responsive to local needs
easier to give consideration to local circumstances greater opportunities for innovation at state level decentralization of political power |
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mandatory rate laws
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state agency or rating bureau sets rates, all req. to use
ex. wc, flood |
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prior approval
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rates must be approved before go into effect.
disadv- conditions might change before rate goes into effect |
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file and use
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must file with st. dept but can go into immediate effect
overcome the problem with delay in prior approval |
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use and file
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change rates and file with state at a later time
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flex rating
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prior approval req. but only if new rates exceed a certain % above or below.
5-10% ab/bel average permits insurers to make adjustment quickly |
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open competition
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market prices determine rates
industry argues in favor of open competition |
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insurance policy language regulated
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legislature
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legislative policy regulation affect four areas
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standard forms
mandatory provisions forms approval readability standards |
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insurer market conduct regulated
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unfair trade and practice act
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unfair trade and practice act regulates
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sales practices
- dishonesty - misrepresentation - twisting (replace one policy with another) - unfair discrimination - rebating |
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utpar
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underwriting practices
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paul v. virginia 1869
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not interstate commerce, exempt from federal regulation
ins. should not be regulated by federal gov estb. a basis for state regulation |
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US vs. SE underwriter assc. 1945
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ruled that insurance was interstate commerce and subject to federal regulation
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McCarran Furg 1945
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returned regulation to the states, fed gave power back to the state
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gramm leach bliley
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removed barriers accross ownership
reaffirmed mccarren allowed playing in other areas opened competition |
