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139 Cards in this Set
- Front
- Back
- 3rd side (hint)
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LIFE INSURANCE |
Offset loss if income and pay final expenses after an insured's death |
Why have it |
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HEALTH INSURANCE |
Provides funding for medical costs due to illness or after injury and to cover financial costs due to disability |
Why have it |
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ANNUITIES |
Can provide a consistent income flow for his lifetime or an allotted amount of time or until death |
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RISK POOLING |
The aggregating of exposure units including the resources necessary to address the losses borne by the exposure units in a way that is predictable by the insurance company and manageable by the insureds |
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LAW OF LARGE NUMBERS |
Statistical concept that suggests the more exposure units we have to study the more likely projections made are likely to be what actually occurs. |
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RISK |
Chance of financial loss |
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PURE RISK |
ONLY the chance of loss |
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SPECULATIVE RISK |
Chance of loss or gain |
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INSURANCE |
Designed to offset the financial impact of pure risk |
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LOSS |
Reduction or destruction in use, value, access, custody or function of persons, property and or intangible personal property rights |
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PERIL |
Contingency that may cause loss |
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HAZARD |
Condition that introduces or increases the chance of loss from a peril |
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PHYSICAL HAZARD |
Physical condition that would likely increase the probability and severity of a loss |
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MORAL HAZARD |
A conscious mental attitude that increases the probability and severity of a loss |
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MORALE HAZARD |
Unconcious mental attitude which increases the probability and severity of a loss |
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ELEMENTS OF AN INSURABLE RISK |
Must be due to chance. Random & outside of insureds control. Definite and Measurable as to cause, time, place and amount. Predictable, determinable using statistical concepts Cant be catastrophic, large enough to wipe out the pool of funds Exposures must be large enough to predict loss possibilities Exposures must be randomly selected to encourage accuracy Loss exposure must not encourage adverse selection |
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ADVERSE SELECTION |
Risks are less favorable |
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HUMAN LIFE VALUE |
Economic Value of life based on an individual's earning potential both present and future. |
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MULTI-LINE INSURANCE CARRIERS |
Carry more than one line of insurance |
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STOCK INSURANCE COMPANIES |
Organized to make a profit Policy Holders do not rec a dividend |
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MUTUAL INSURANCE COMPANIES |
Organized to meet the needs of policy holders Policy Holders share in dividends |
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POLICY DIVIDENDS |
Return of premium that remains after a company has paid expenses Never guaranteed |
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PARTICIPATING COMPANIES |
Companies that share dividends i.e. Mutual Companies |
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MUTUALIZATION |
When a stock company coverts to a mutual company |
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DEMUTUALIZATION |
When a mutual company converts to a stock company |
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RECIPROCAL INSURERS |
Insureds are the owners of the company Insureds share in the risk of losses |
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RECIPROCAL INSURERS ARE MANAGED BY |
an attorney-in-fact |
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WHAT IS LLOYDS OF LONDON |
An association which provides an arena in which companies and individuals organize as syndicates to pool funds and underwrite risks |
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HOME SERVICE "DEBT" INSURERS SELL |
Industrial Insurance characterized by small face amounts of life insurance with a weekly premium mode which is collected by the selling agent on a weekly or monthly basis and most normally "in person". |
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WHO BUYS REINSURANCE AND WHY |
Insurance companies buy this insurance to insulate itself from the risk of a major claims event which could be catastrophic |
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RISK RETENTION INSURANCE |
Mutual Insurers that protect people in their professions |
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FRATERNAL BENEFIT SOCIETIES |
Insurers Non-Profit Provide life & health insurance to members of religious or social orgs Operate solely for benefit of their members Smaller # of policy holders than commercial carriers Most are regionalized They provide non-insurance related benefits to members |
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MUTUAL COMPANIES ISSUE WHAT KIND OF POLICIES |
Participating Policies Policyholders share in dividends |
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SERVICE PROVIDERS
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Do not sell insurance they offer benefits |
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SELF INSURERS
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Establish its own reserves to cover potential losses |
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PRODUCERS |
represent insurers’ products and services by direct sales and other marketing efforts.
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AGENTS can be |
CAPTIVE CAREER OR INDEPENDENT Represent Insurance Companies |
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GOVERNMENT AS INSURER |
FUNDED WITH TAXES |
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HMO TYPE OF PREMIUM |
FIXED AMOUNT OF PREMIUM
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PPOs OFFER |
PRICE DISCOUNTS with select providers |
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FOR A CONTRACT TO BE VALID IT MUST CONTAIN |
CONSIDERATION LEGAL PURPOSE COMPETENT PARTIES |
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ADHESION |
One party prepares the contract and the other accepts or adheres to it as it is written.
courts have ruled that any ambiguities in insurance contracts are construed in the most favorable light to the non-drafting party (the insured). |
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UNILATERAL |
one party makes an enforceable promise.
Insurance co promises to pay benefits but insured is not obligated to do anything, incl pay premiums |
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CONDITIONAL |
MEANS THAT CERTAIN CONDITIONS MUST BE MET. |
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ALEATORY |
Element of chance for both parties Conditioned on an occurrence of an event Value exchanged may be unequal |
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INDEMNITY |
PAYS A VALUE EQUAL TO LOSS |
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VALUED |
PAYS A STATED SUM REGARDLESS OF ACTUAL LOSS INCURRED |
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SUBROGATION |
Inherent to indemnity contracts where once the claim is paid, the ins co acquires the right to take action against a third party |
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UTMOST GOOD FAITH |
Both parties to a contract know all facts and relevant information |
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WARRANTY |
Applicants statement is guaranteed to be true. If statement is false it could be grounds for contract to be revoked. |
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REPRESENTATION |
Applicants statement is what they believe to be true |
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CONCEALMENT |
Failure of applicant to disclose known facts |
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SOCIAL INSURANCE PROGRAMS INCLUDE |
Social Security
Medicare Medicaid |
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LAW OF LARGE NUMBERS |
Founded on the ability to predict the apprx number of deaths or frequency of disabilities within a certain group during a specific time |
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WHAT KIND OF RISKS ARE INSURABLE |
Pure Risks |
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STOCK INSURANCE CO |
Private Organization Created to make a profit for stockholders Stockholders may or may not be policyholders When declared taxable stock dividends are paid to stockholders Directors and Officers are responsible to stockholders Nonparticipating Company Policyholders do not participate in dividends resulting from stock ownership |
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HMO |
Service provider offering a wide range of health care services to member subscribers. For fixed periodic premium paid in advance of any treatment subscribers are entitled to services of certain physicians and hospitals contracted to work with them. Distinct because they provide financing for health care plus the health care itself. Stresses preventative care and early treatment programs. |
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PPO |
Preferred Provider Organization Group desiring health care services (i.e. employer or union) obtains price discounts or special services from certain select health care providers in exchange for referring its employees or members to them. Can be organized by employers or health care providers themselves. A contract will spell out services to be provided Insurance companies can also contract with ______ to offer services to insureds. |
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OASDI |
Old-Age, Survivors and Disability Insurance... a/k/a Social Security Government as Insurer |
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HI |
Social Security Hospital Insurance Medicare Government as Insurer |
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MEDICAID |
Government as Insurer |
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WHO SELLS INSURANCE |
Licensed Producers Agents or Brokers |
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BROKERS REPRESENT |
BUYER/CUSTOMER |
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1945 McCARRAN-FERGUSON ACT |
Made it clear STATES are to regulate insurance and made possible the application of the Federal Antitrust Laws. |
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1970 FAIR CREDIT REPORTING ACT |
Requires fair and accurate reporting of information about consumers |
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CONTINUING ED REQUIREMENTS |
24 Hours every 2 years If licensed 6 yrs or more, 20 Hours every 2 years |
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APPOINTMENTS |
Must be appointed by an Insurance Co If an agent goes longer than 48 months without an appointment license will be terminated. |
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SELLING TO NEEDS |
Determine needs Find product that meets needs Includes Fact Finding and Education of client |
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SUITABILITY QUESTIONS |
Client needs? Product to meet needs? Does client understand product? Can client afford product? Is product in best interest of client? |
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DISCLOSURE |
Inform client about ALL aspects of product |
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DOCUMENTATION |
Document all meetings and transactions |
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NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS |
UNFAIR TRADE PRACTICE-gives CFO power to investigate and penalize insurers and producers STATE GURANTY ASSOC-covers claims if an insurance co becomes insolvent |
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UNFAIR TRADE PRACTICE |
Gives Chief Financial Office the power to investigate and penalize insurers and producers |
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STATE GUARANTY ASSOCIATIONS |
Supports insurance companies and consumers if an insurance company goes insolvent. It covers the claims. |
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AGENTS |
producer representing and binding the company within the authority granted to the agent by the insurer.
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BROKERS |
an agent of the insured and NOT OF THE INSURANCE COMPANY.
Presents “offers” to an insurance company on behalf of the insured |
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CAPTIVE CAREER AGENTS |
are producers who work for one insurance carrier solely and sell only that carrier’s products
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INDEPENDENT AGENTS |
are agents representing more than one insurance company whose contracts do not preclude them from selling products of any other company.
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CAREER AGENCIES |
are branches of insurance carriers or managing general agents for specific companies where marketing and sales activities are undertaken.
The primary focus of Career Agencies is to recruit, train, and supervise career agents. |
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PERSONAL PRODUCING GENERAL AGENCIES (a.k.a. PPGAs)
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similar to the career agency system; however PPGA’s do not recruit and supervise career agents.PPGAs primarily focus on one thing…selling insurance.
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INDEPENDENT AGENCY SYSTEM |
represents several carriers and the agency is paid on a commission or fee basis by the insurance companies it represents for the policies that the agency sells.
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DIRECT SELLING |
insurer sells directly to the consumer AND no “outside” agents are involved.
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MASS MARKETING |
sales efforts are a large and unfocused basis to reach the overall general public. i.e. radio, television
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THE MAIN TWO PURPOSES OF INDUSTRY OVERSIGHT ARE |
Consumer Protection &
Insurer Solvency |
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1868 PAUL v VIRGINIA |
Supreme Court ruled that the sale of insurance is not interstate commerce; upholding the right of states to regulate insurance.
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2001 USA PATRIOT ACT |
created to deter and punish terrorist acts in the United States and around the world; to enhance law enforcement investigatory tools; and for "other purposes".
affects the insurance industry by requiring proactive anti-money laundering requirements. |
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OFFICE OF INSURANCE REGULATION, DIVISIONS AND BOARDS ARE HEADED BY |
Commissioner Director Superintendent (depending on State) |
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LIFE INSURANCE |
People who buy this type of insurance are called Policyowners. Transfer of ownership is called assignment. Not a personal contract |
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COMPETENT PARTIES |
must be over 15 mentally capable Not under influence of drugs or alcohol |
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FLORIDA REGULATION OF INSURANCE INDUSTRY INCLUDES |
Issuing rules and regulations Licensing and overseeing agents and brokers Licensing and overseeing insurance companies formed in FL Controlling insurance contracts and policies sold in FL Determining amount of reserves an insurer needs to carry Regulating insurers' investment activities Overseeing marketing practices and consumer complaints |
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LICENSED OR CERTIFIED INSURERS A/K/A AUTHORIZED |
have been granted the ability by the department to do business in FL |
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DEPARTMENT GRANTS WHO THE ABILITY TO DO BUSINESS IN FL? |
Licensed or Certified Insurers better known as Authorized Insurers |
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DOMESTIC INSURERS |
companies doing business in the state they were incorporated in. Headquartered in FL |
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FOREIGN INSURERS |
Companies doing business in states other than where they were incorporated |
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ALIEN INSURERS |
Insurers that were incorporated in a country other than USA |
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NET PAYMENT COST COMPARISON INDEX |
gives insured an idea of how much a policy will cost at some future point compared to its benefit at that time |
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SURRENDER COST COMPARISON INDEX |
shows insured cost of surrendering their policy and withdrawing cash at future values over time |
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BUYERS GUIDES |
Improve buyers understanding of policy features Improve a buyer's ability to compare different plans of insurance |
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POLICY SUMMARY INCLUDES |
Name and address of Agent Name and Address of the Ins Co Generic Name of Basic Policy and Ea Rider 1st Five yrs and representative policy years thereafter info to illustrate premium and benefit patterns Equivalent level annual dividend, if participating policy, for same durations at which life ins cost indexes are displayed Policies incl dividends, statement that dividents are based on company's current dividend scale & arent guaranteed. Preparation date of Policy Summary |
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NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS FOUR MAIN OBJECTIVES.... |
Encourage uniformity in state law & regulation Assist in administering laws and regulations to promote industry efficiencies Protect the interest of consumers and insurance companies Preserve regulation and to preserve the business of insurance |
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ADVERTISING CODE |
specifies words and phrases which may be considered misleading to clients and are not to be used in any form. |
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FLAHIGA, FLORIDA LIFE AND HEALTH INSURANCE GUARANTY ASSOC PROVIDES |
Life Insurance Death Benefit up to $300K Life Insurance Cash Surrender up to $100K Health Insurance Claims up to $300K Annuity Cash Surrender up to $250K for deferred annuity contracts per contract owner Annuity in Benefit up to $300K |
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FLORIDA PROPERTY & CASUALTY INSURANCE GUARANTY ASSOC |
Created by FL congress in 1970 a/k/a FIGA Non-Profit Handles claims of insolvent co Members made up of all FL P&C licensed ins co Surplus lines are not eligible for coverage Covers up to $300K for loss to a structure and contents on HO claim & will pay addtl 200K for contents |
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NAIFA NATIONAL ASSOC OF INS AND FINANCIAL ADVISORS AND NAHU NATIONAL ASSOC OF HEALTH UNDERWRITERS |
organizations in life and health ins community dedicated to supporting ins industry and advancing agent knowledge and advancing service |
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RATING SERVICES |
companies which evaluate insurance companies and are used as guides for insurance company financial solvency and claims paying ability.
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FRATERNAL BENEFIT SOCIETY MUST.... |
Be non-profit have a lodge system have a representative form of govt |
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FOR A CONTRACT TO BE ENFORCEABLE ANY OFFER MUST BE |
Definite and unqualified |
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ACCEPTANCE OF A CONTRACT MUST BE |
In exact terms of the offer and communicated to the offeror in time and manner prescribed in the offer |
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COUNTEROFFER |
When recipient of offer does not accept offer on exact explicit terms but instead makes an offer back to offeror |
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CONSIDERATION |
value given in exchange for a promise
often referred to as something for something |
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APPLICANTS ARE NOT CONSIDERED COMPETENT IF |
They are minors Mentally Ill Under the influence of drugs and/or alcohol |
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INSURANCE CONTRACTS ARE ALEATORY BECAUSE |
Element of Chance Dollar Values exchanged between parties may not be equal |
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PERSONAL CONTRACTS |
Can't be assigned to a 3rd party w/o insurer's written consent Policyowners have no bearing on risk the insurer has assumed. |
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CONDITIONAL CONTRACTS |
Insurance contracts
Both the insured and insurance company are required to “perform” or meet duties or obligations under the insurance contact. |
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INSURABLE INTEREST |
Person purchasing the policy must have an insurable interest in of insured. It is not required over life of the policy or at the time of claim. |
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STRANGER ORIGINATED LIFE INSURANCE |
Strictly prohibited by FL statute |
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AGENT'S ROLE AND RESPONSIBILITIES INCLUDE |
explaining insurance policies to prospects and insureds
selling applications of insurance collecting premiums providing service to prospects and existing clients |
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UNDER AGENCY LAW THE INSURANCE COMPANY IS CONSIDERED THE.... |
Principal |
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AGENCY LAW |
Governs relationship between agent and insurer. An act by the agent is considered an act by the principal. |
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FOUR MAIN PRINCIPALS OF AGENCY LAW |
Contract is completed by agent and is a contract of and by the insurer Acts of agent are acts of insurer payments made to agent on behalf of insurer are payments to insurer Knowledge of agent regarding any business of the principal is presumed to be knowledge of the principal. |
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AUTHORITY |
scope of authorization granted to an agent by the principal .
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EXPRESS AUTHORITY |
the insurer gives explicit, direct, and unequivocal authority to an agent.
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IMPLIED AUTHORITY |
when an insurer doesn’t explicitly give an agent authoriity but the agent is assumed to have the authority in accordance with transacting business on behalf of the insurer.
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APPARENT AUTHORITY |
the power of an agent to act on behalf of a principal, even though not stated or implied.
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FIDUCIARY IS REQUIRED TO |
Be fit & proper Be Honest & Trustworthy Have a good business reputation be qualified to perform ins functions have knowledge of and abide by state law & regulations Act in good faith |
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E & O, ERRORS AND OMISSIONS PROFESSIONAL LIABILITY INSURANCE |
pays sums that the agent is legally obligated to pay for injuries resulting from the agent’s acts or failure to act in the agent’s professional activities as an insurance agent. The policy covers the legal expenses associated with defending the agent and the legal defense is in addition to and not part of the policy limits.
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WAIVER |
Voluntary surrender of a legal right. In insurance the surrender is forever. |
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ESTOPPEL |
Required forebearance of a right due to an act or faulure to act. |
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PAROL EVIDENCE RULE |
when peoplle put agreements in writing any oral representations made prior to or after do not change the written contract. the written contract stands on its own. Oral statements to the contrary cannot alter the written agreement |
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VOID CONTRACT |
an agreement without legal enforceability |
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VOIDABLE CONTRACT |
Valid and enforceable conract but one that can be cancelled for a legit reason due to policy language or law. |
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CONTESTABILITY PERIOD OF LIFE INSURANCE |
Two Years After 2 years have passed insurer cannot deny benefits for any reason |
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SYSTEMS THAT SUPPORT THE SALE OF INSURANCE TROUGH AGENTS AND BROKERS ARE |
Career agency system Personal producing agency system Independent agency system |
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COMMUTATIVE CONTRACT |
No element of chance Goods exchanged are of equal value |
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WHO ISSUES INSURANCE LICENSES |
Department of Financial Services |
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COMPLIANCE |
conducting business in accordance with current rules and laws. |
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ETHICS |
Standards of conduct and moral judgement. |
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MARKET CONDUCT |
a combo of both ethics and compliance |
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PRODUCERS HAVE AN ETHICAL OBLIGATION TO.... |
Policyowners Insurers The Public The State |
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