General Insurance

Front 1

NAIC What is it? What's its authority

Back 1

National Association of Insurance Comissioners. State and territorial, provides resources and research, promotes uniformity. Can't inact Insurance laws.

Front 2

FIO what is it? What authority does it have?

Back 2

Federal insurance office. Monitors insurance industry and gives access to underserved communities. Not a regulator of insurance.

Front 3

Is insurance primarily regulated by state or federal

Back 3

State

Front 4

Purpose of judicial branch?

Back 4

Interpreting and determining Constitutionality of statutes

Front 5

Purpose of legislative branch

Back 5

Pass insurance laws and regulations

Front 6

Purpose of executive branch?

Back 6

Enforces insurance laws

Front 7

Which act determined that federal government can't regulate insurance

Back 7

McCarran-Ferguson act of 1945

Front 8

Define stock insurance company

Back 8

Owned by stockholders and shareholders, stockholders receive taxable dividends as a return of profit

Front 9

Define mutual insurance company

Back 9

Owned by policyholders, a board of trustees is elected by the policyholders. Recieve non-taxable dividends as a return of unised premium. Typically issuing participating policies

Front 10

Define reciprocal insurance company

Back 10

Unincorporated group owned insurers that exchange insurance among each other

Front 11

Define Lloyd's of london

Back 11

Consists of a group of underwriters called syndicates who write coverage for specific risks. Members are individually liable. Coverage underwritten by syndicate manager

Front 12

Define Fraternal benefits society

Back 12

Usually non profit, charitable activity providing life and health insurance to its members

Front 13

Define risk retention groups (RRG)

Back 13

Primarily assume and spread liability risks among its members, owned by policy holders. Must be made of a large group insuring similar exposure

Front 14

Define residual markets

Back 14

A private coverage as last resort for someone who cannot find coverage with any voluntary market insurers

Front 15

Define risk sharing plan

Back 15

Insurers agree to portion among themselves the risks unable to obtain insurance through normal channels

Front 16

Define domicille

Back 16

Refers to the jurisdiction of an insurer

Front 17

What can a non-admitted insurer issue?

Back 17

Surplus and excess

Front 18

Define exclusive/captive agency

Back 18

Deals with insured through captive agent, meaning they solely represent 1 company. Agent is an employee or commissioned independent contractor.

Front 19

Define direct writing system

Back 19

Producer/agent is an employee of the insurer, paid either by just salary, or can additionally make commission

Front 20

Define independent agency

Back 20

Enters into agency agreements with multiple insurers, and retaine ownership of written business. An independent contractor receives commission

Front 21

Define career agency system

Back 21

Agents are recruited, trained and supervised by agent who is contracted with a company

Front 22

Define personal producing general agent

Back 22

Doesn't recruit career agents. Maintains its own staff and sells insurance with carriers

Front 23

Define direct mail response company

Back 23

Direct marketing style system, sells direct to the public through licensed employees

Front 24

Define mass marketing

Back 24

Targeting a specific type of insurance

Front 25

In the law of agency who is the producer acting on behalf of?

Back 25

The principal

Front 26

Define express authority

Back 26

Written into contract

Front 27

Define implied authority

Back 27

Not specifically in the contract but is reasonable to assume duties are necessary

Front 28

Define apparent authority

Back 28

When a producer exceeds the authority stated in the contract

Front 29

What is the fair credit reporting act for?

Back 29

Protects the consumers privacy and assures info will only be used for proper purposes. They also have the right to review and challenge incorrect info. No lawsuits over 7 years no bankruptcy over 10 years.

Front 30

What is the merchant marine act (Jones act) for?

Back 30

Allowing workers comp options for seamen

Front 31

What is the motor carrier act?

Back 31

Prohibits any entity from interfering with truckers setting their own rates.

Front 32

What is the Gramm-Leach-Bliley act?

Back 32

Requires a privacy notice on policies w/ the right to opt out

Front 33

What is the violent crime control & law enforcement act?

Back 33

Prevents people with previous dishonesty or breech of trust felonies from working in insurance

Front 34

What is speculative and pure risk, which one can be insured

Back 34

Speculative can have a negative or positive outcome, like gambling. Pur risk can only have a negative outcome, pure risk is insured.

Front 35

Define adverse selection

Back 35

Risks more prone to losses than the average insurance, so they seek insurance in a specific market.

Front 36

6 characteristics of insurable risk

Back 36

1. Large group of similar units

2. Loss must be calcuable

3. Lost must be measurable

4. Premiums must be affordable

5. Loss must be accidental

6. No Catastrophic perils

Front 37

Define indemnity

Back 37

Insured return to previous state after loss, doesn't make profit

Front 38

Define tort law

Back 38

Torts are civil wrongs not crimes, they result in injury or harm that constitute a claim from a third party

Front 39

Define estoppel

Back 39

Prevents denial of fact, fact was stated true previously

Front 40

Define hold harmless agreement

Back 40

Contract agreement that transfers liability from 1 party to another

Front 41

Define parol evidence rule

Back 41

Contract may not be altered without written consent of both parties

Front 42

What is "consideration" when referring to a contract

Back 42

An exchange or something of value (i.e premium)

Front 43

Define contract of adhesion

Back 43

Insurer writes the contract and the applicant can take it or leave it

Front 44

Define aleatory

Back 44

Exchange or value is unequal, payment for a claim is higher than premium

Front 45

Define value contract

Back 45

Contract that pays a stated amount in the event of loss

Front 46

Define indemnity contract

Back 46

Agreement to pay on behalf of another party under specific circumstances

Front 47

Define unilateral contract

Back 47

Only one party is legally bound, only the insurer makes future promises. And only they can be charged with breech of contract

Front 48

Define representations

Back 48

Statement true to the best of one's knowledge

Front 49

Define class rating

Back 49

Rate charged based of a group who have similar exposures/experience

Front 50

Define experience rating

Back 50

Based on individual loss history

Front 51

Define individual rating

Back 51

Specialty risk, small amount of data

Front 52

Define "A" rating/judgment rating

Back 52

Rating that uses underwriters best judgement on the risk posed

Front 53

Define loss cost rating

Back 53

A rating organization provides insurers with a portion of the rate but then they must input expense and profit

Front 54

Define manual rating

Back 54

Rates contained in a manual published by the insurer

Front 55

Define merit rating

Back 55

Rating the rewards the insured for taking risk preventing steps

Front 56

Define retrospective rating

Back 56

Rating that adjusts the policy premium based on current loss experience

Front 57

Define schedule rating

Back 57

Method of rating risks by using charges and credits to modify a rate based on particular risk

Front 58

Define open competition

Back 58

State relies on competition between insurers to produce fair rates

Front 59

Define case reserve method

Back 59

A loss reserve established for each claim when reported

Front 60

Define loss ration method (loss reserves)

Back 60

Based apon expected losses for a particular class or line

Front 61

Define tubular method (loss reserves)

Back 61

Based on life expectancy or expected disability

Front 62

Loss ration formula

Back 62

Paid losses+loss reserves÷total earned premium

Front 63

Expense ratio equation

Back 63

Total operating expenses÷written premiums