Doi California Insurers

Front 1

What is an Exclusive Agency System.

Back 1

Under the Exclusive Agency System policies are sold through agents who represent only one insurer. They are usually independent contractors paid on a commission basis. the agent sometimes owns the book of business but, upon ending the contractual relationship with the insurer, must return or sell the accounts back to the insurer.

Front 2

What is the function of the Actuarial department of an insurer?

Back 2

The Actuarial department is the "numbers" department. It calculates rates and estimates loss reserves.

Front 3

What is domicile?

Back 3

Domicile refers to the state or country in which an insurer has been organized.

Whether an insurer is admitted or non-admitted has nothing to do with its domicile.

Front 4

What are the three types of Domicle.

Back 4

Domestic Insurer is organized under the laws of CA.
Foreign Insurer is organized under the laws of a state other than CA.
Alien Insurer is a foreign insurer organized under the laws of a country other than the US.

Front 5

What is the difference between admitted and non-admitted insurers?

Back 5

An Admitted Insurer is licensed to do business in California. It holds a Certificate of Authority and is subject to regulation by the California Dept. of Insurance.
A Non-admitted Insurer is not licensed and does not hold a Certificate of Authority and is not subject to regulation by the CDI.

Front 6

Who may be an Insurer?

Back 6

Any person capable of entering into a valid contract.
Of course, this is subject to other restricitons, such as requirements for minimum levels of assets and minimum levels of capital and surplus.

Front 7

What are the Characteristics of Stock Insurers?

Back 7

Stock Insurers are organized as corporations that are owned by the stockholders who invested in them. Profits go to the stockholders in the form of dividends.

Front 8

What are the characteristics of Mutual Companies?

Back 8

Mutual companies are organized a s corporations, but are owned by the policyholders. Any profits go to the policyholders in the form of dividends.

Front 9

What are the characteristics of Reciprocal Companies?

Also known as Inter-Insurance Exchanges.

Back 9

Reciprocal companies (also known as Inter-Insurance exchanges) are organized as associations and are not incorporated. The members of the association, called subscribers, essentially insure each other. The company is managed by an attorney-in-fact and any profits go to policyholders in the form of Dividends.

Front 10

What are the characteristics of Risk Retention Groups?

Back 10

Risk Retention groups are insurance companies formed by entities engaged in the same industry or activity to provide insurance for their members. No protection for a policyholder if the goup becomes insolvent.

Front 11

What types of rating methods do underwriters use to price insurance coverage appropriately?

Back 11

Manual Rating: standard rates apply to all members of a particular class of insureds.
Merit Rating: standard rates are increased or decreased for a particular risk based on its specific characteristics which are likely to affect frequency or severity of losses.
Judgement Rating: specific rates are developed by an underwriter for a particular insured. Usually it is a unique risk or one for which no class rates have been established.

Front 12

What are the characteristics of Lloyd's of London?

Back 12

Lloyd's of London is not an insurance company. The members are individually responsible for paying losses.

Front 13

What is an Independent Agency System?

Back 13

Independent Agency System policies are sold through independent agents who own their book of business. They are independent contractors, rather than employees. They usualy represent several insureres and are paid on a commission basis.

Front 14

What is a Direct Mail system?

Back 14

In the Direct Mail System solicitation is handled by mail, phone or Internet with no meeting between the insured and any company employee. The company employee usually receives a salary and the insurer owns the book of business.

Front 15

What is a Direct Writer System.
Same as Direct Market Response.

Back 15

Policies are sold by employees under the Direct Writer System. The sales force is compensated by salary, commission or a combination of both and the unsurer owns the book of business.

Front 16

When is an insurer deemed to be insolvent?

Back 16

Insolvency is the "impairment of minimum paid-in capital" required by the insurance code. This means that the company does not have the level of assets required by the code for the classes of insurance it transacts.