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46 Cards in this Set

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General agent
Has the authority to manage all of a company's business within his or her territory, to appoint other agents and to settle claims. Not to be confused with general insurance agent as opposed to an agent for life insurance
Types of legal system
Common law and Civil Code of Quebec
Contract, Principal, Agent

Mandate, Mandator, Mandatory. An agent is the person who represents a principal i.e. insurer



Express contract
Could be orally or written where the terms of arrangement is agreed by both parties.
Implied contract
Parties have acted in a way that is understood that a principal-agent relationship exists

Agent/Broker Responsibility

Act within the terms of the contract


Follow instructions as to typed of business which may be written


Collect premiums and hold these amounts in trust until


Remit premiums


Advise insurer of the business written promptly


Advise the insurer of all claims promptly

Binding Authority
The capacity to confirm to applicants that they have coverage. Gives them authority to bind the insurer to a contract of insurance. (This happens anytime within the term of contract).

Binder
Binder is the confirmation that insurance coverage is in effect. The coverage is subject to the limit as outlined in the agency agreements between the insurer and agent/broker. It is a memorandum of an agreement to insure and is usually issued by the insurer pending the writing of a policy and given to the agent/broker. A policy will be issued as soon as all necessary details is at hand.

Cover note
Written binder: it is a notice of confirmation to the insurer and insured that the insurer has been bound to a contract of insurance in accordance to the details given. In practice, binders and cover notes are used interchangeably that is when one is issued, the second copy of it is used to fulfil the function of the other.
Trust account vs. operating account
Trust account is used to collect premiums and remit premiums. Operating account is used for general business i.e. depositing commissions, paying salaries e.t.c.
Who regulates insurance intermediaries?
By the authority provided within the Insurance act of each province. Some provinces have passed legislation allowing self-regulation
Where do insurance agents/brokers get their authority?
The insurance act and the contract they have with insurer
Consistent production consists of 4 elements

A sales quota


Time Control


Prospecting and selling


Product knowledge

Sales is achieved by

Commision income goal


New business


Renewal business


additional business on existing clients/policies

Another name for an insurer
Carrier

Losses incurred but not yet reported
IBNR: incurred but not reported
Net worth
Assets less liability
Assets
All of the company's wealth
Liabilities

Money owed
Two columns of a company financial statement
Its assets or things it owns and; its liabilities or the amount it owes or expects to owe
Basic task of the Under Writing department
Selection of risks
What does the casualty department under write
liability insurance, accident and sickness, various crime insurance, boiler and machinery
Subject of an insurance contract
Risk

Exposure
Danger of loss arising from what happens to another risk close by. Also is the sum total of values which if damaged or destroyed would cause loss under a policy ie it is the value of everything a policy insures.
Retention
The max amount an insurer will insure. It is the amount an insurer retains for its own account not including reinsurance.
Reinsurance
When an insurer may share its risk with another insurer by paying this insurer a portion of the premium. A reinsurer pay only the company it reinsures and not the actual policyholder
Monopolistic vs alternative market
Type of govt insurance that is compulsory i.e. automobile, workers compensation, unemployment insurance etc.
Directors responsibility
Pass basic resolutions for the conduct of business. See to it that the company is run according to it by laws and according to the law and regulations of the provincial and federal government. They are responsible for the broad policy of the company that is the rules and guideline to be followed in the operations of the business.
Shareholders choose directors in an incorporated company or directors are chosen by the policyholders in a mutual company. The Board of Directors choose the Chairman.

CEO responsibility
Carries out the policies set by the Directors.
Regulation of insurance agents has four aspects

Qualification


Licensing


Operating Requirements: follow requirements of insurance provincial act


Renewal of License

Five areas of vital concern in operating an insurance agency or brokerage

Finances


Production - new and renewals


General management


Accounting


Claims handling

Adequate capacity
Provide full range of insurance protection to clients
Profit commission
extra commission paid annually by insurer if the agent produced a certain level of profitability as agreed in the agency agreement
Stock company
Fire, marine and casualty insurance companies are done via Stock companies. Companies have to retain sufficient assets free from other encumbrances to cover all their liabilities in the form of two major ones: unearned premium reserves and outstanding loss reserves
Unearned premium reserves
Premium not earned: fund must be available to refund any unearned premium should the policy be cancelled at some point
Outstanding loss reserves
Funds set aside to pay losses which have been incurred but not yet paid
Incurred but not reported reserves
Losses had occurred but not yet reported or recorded by insurer. Insurer must estimate such losses and also set aside funds to cover them when they are reported.
Lloyd's insurance market
Consists of independent members (corporate and individual) who provide capital to the market. They tend to write new, difficult and complex risks. Does not deal with clients directly but through a global network of insurance brokers. Their franchise are run by a managing agent who employ UW staff and manage the syndicate on behalf of the members. Members are not responsible for each others loss. members accept insurance business through syndicates. Lloyd's broker place risk in the Lloyd's market on behalf of the client(s).
Group of members
Syndicates
Mutual insurer's operate for the benefit of their members

Factory mutual specialize in the field of fire prevention

Stock mutuals
Shareholders carry on the business of writing participating policies with insuring company
Co-operative stock mutual
Operate as stock company and are risk capital based; no dividends per share capital are paid but surplus profits are distributed/
What is a line
Refers to a class of risk
Liability insurance is written under this department
Casualty department