Insurance knowledge

From general, personal sources. For my knowledge in the future.

An individual authorized to solicit, sell, and transact coverage for specific insurance providers under an agent contract.

Agent

A person who represents the insured (client) rather than the insurance company and cannot bind coverage.

Broker

The department responsible for processing, investigating, and paying claims.

Claims department

The transfer of risk through the pooling or accumulation of funds.

Insurance

The customer who receives insurance protection under an insurance policy.

Insured

An insurance company that provides coverage and assumes risk.

Insurer

An insurer owned by policyholders that typically issues participating insurance policies with potential dividends.

Mutual Insurance company

A policy that doesn't provide dividends or voting rights to policy owners.

Nonparticipating policy

A policy that allows policy owners to receive dividends and elect the board of directors.

Participating policy

An individual licensed to sell, solicit, or transact insurance, including both agents and brokers.

producer

An insurer owned by stockholders that typically issues nonparticipating policies.

Stock Insurance Company

The department responsible for reviewing applications, approving or declining coverage, and assigning risk classifications.

Underwriting department

The ______ states that the goal of an action is to “restore” an insured to the same financial position they were in prior to when the loss in question occurred.

"principle of indemnity"

_________ also holds to the principle that an insured shall not profit or gain from their loss. In other words, they will not receive more than they lost.

Indemnification

The company providing the insurance is referred to as the _____, while the person receiving coverage is known as the _____

insurer, insured.

Private citizens or groups own commercial insurance companies, which may be proprietary or cooperative.

Private, commercial insurance

Federal and state governments also offer a variety of coverage, commonly referred to as social insurance.

Government, social insurance

Companies that sell more than one line of insurance are referred to as “___________”

multi-line insurers

A company that only sells one line of insurance is considered a _____ insurer

monoline

an insurance company owned by private investors (i.e., stockholders/shareholders).

stock insurance company

Stock companies seek to grow their ___________ (earned surplus or retained earnings) that are not paid out in the form of cash dividends.

post-tax earnings

Stock insurance companies issue ____________.

nonparticipating insurance policies

Nonparticipating policies are also called “______” policies.

non-par

organized and incorporated under state laws, but they have no stockholders; therefore, ownership rests with the policy owners.

What type of insurance company is this?

Mutual insurance companies

Any person who purchases insurance from a mutual insurer is both a ______ (i.e., policy owner) and an ______ of the insurer.

customer, owner

A mutual company dividends are not ______.

taxable

the amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

divisible surplus

Occasionally, a stock company may be converted into a mutual company through a process called_______.

mutualization

mutual companies can convert to stock companies through a process called "___________."

demutualization

If an insurance company issues both participating and nonparticipating policies, it is referred to as using a ________.

mixed plan

_____________ are noted primarily for their social, charitable, and benevolent activities, but they also issue insurance to cover their members.

fraternal benefit societies

To be characterized as a fraternal benefit society, the organization must have the following characteristics:

• It must be a non-profit organization

• It must have a lodge system that includes ritualistic work and must maintain a representative government form with elected officers

• It must exist for reasons other than obtaining insurance

Reinsurers are a specialized branch of the insurance industry because they _____ other insurers.

insure

In a reinsurance agreement, the insurance company that transfers its loss exposure (risk) to another insurer is called the primary insurer, or ________

ceding company

A typical reinsurance contract between two insurance companies is referred to as ________.

treaty reinsurance

________ reinsurance is tailored to specific risks on a case-by-case basis.

facultative

Government insurers are owned and operated by a federal or state entity. They are commonly referred to as _________.

social insurance

What are the two classifications of insurers?

authorization status and domicile status

ABC Insurance Company of Puerto Rico operates as a domestic insurer in Puerto Rico; however, it’s also licensed or authorized in the State of Florida, which means that it operates throughout the State of Florida as a _____ insurer.

foreign

Rising Sun Life of Tokyo, Japan, is authorized to transact insurance business in Florida and Puerto Rico as an _____ insurer.

alien

Insurer that is authorized by a certificate of authority transact insurance business in a particular state

Authorized/admitted insurer

Insurer that has not been granted a certificate of authority and is prohibited from conducting insurance operations in a particular state.

Unauthorized/non admitted insurer

Nonadmitted insurer offering surplus lines insurance without a certificate of authority. Only allowed under certain circumstances and heavily regulated.

surplus lines insurer

Insurer incorporated under the laws of the state in which it conducts insurance business.

domestic insurer

Insurer conducting insurance business in a state other than where its offices are located.

Foreign insurer

Insurer incorporated in a country other than the United States.

Alien insurer