Wisconsin Accident & Health Insurance Exam. 177 Questions and Correct Answers, With Complete Solution. 2024/5. 100% Correct.
Commercial Insurers (Private Insurance Companies)
- in the business of selling insurance for a profit
- offer many lines of insurance aka multi-line (some sell primarily life insurance and annuities while other
sell accident and health insurance, or property and casualty insurance)
- function on the reimbursement approach
- typically lets policy owners assign benefit payments from the insurer directly to the health care provider, thus relieving the policy owner of first having to pay the medical care provider
- divided into two main groups: stock and mutual insurers
Multi-Line Insurer
an insurance company selling more than one line of insurance
ex: commercial insurers
Stock Companies
- one of two main groups of commercial insurance
- organized and incorporated under state laws for the purpose of making a profit for its stockholders (shareholders)
- sometimes called nonparticipating insurers because policyholders do not participate in receiving dividends or electing the board of directors, unless they are also a stockholder of the company
- when declared, stock dividends are paid to stockholders
- the directors and officers are responsible to the stockholders
- dividends are subject to taxation because they are considered profit
Mutualization
transformation of a stock insurer into a mutual insurer Mutual Companies
- owned by their policyholders
- known as participating insurers because policyholders participate in receiving dividends and electing the board of directors
- when declared, mutual company dividends are paid to the policyholders
- dividends are not subject to taxation because the dividends are considered to be a return of premium. the only exception is if the policy owner chooses to let the dividends sit and collect interest. (in this case,
only the accumulated interest would be taxable)
Mixed Insurer
- when a company operates as both a PARTICIPATING and NONPARTICIPATING insurer
True or False: Dividends can be guaranteed
False: dividends can NOT be guaranteed regardless of the company offering them
How are strong assessment mutual companies classified?
by the way they charge premium
A pure assessment mutual company
- operates based on loss-sharing by group members
- no premium is payable in advance. instead, each member is assessed an individual portion of losses that occur
An advance premium assessment mutual
- charges a premium at the beginning of the policy period
- if the original premiums exceed the operating expenses and losses, the surplus is returned to the policyholders as dividends. however, if total premiums are not enough to meet losses, additional assessments are levied against by the members
- normally, the amount of assessment that may be levied is limited either by state law or simply as a provision in the insurer's by-laws
Fraternal Benefit Societies
- special types of mutual companies (EX: nonprofit religious, ethnic, or charitable organizations) that provide insurance solely to their members
- must be formed for reasons other than obtaining insurance
Risk Retention Groups mutual companies formed by a group of people in the same industry or profession
EX: pharmacists, dentists, engineers
Service Providers
- offer benefits to subscribers in return for the payment of a premium
- benefits are in the form of services provided by hospitals and physicians in the plan
- these services are packaged into various plans and those who purchase the plans are known as the SUBSCRIBERS
- EX: Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO)
Reciprocal Insurers
- unincorporated groups of individual members that provide insurance for other members through indemnity contracts
- each member acts as both insurer and insured and are managed by Attorney in Fact
Reinsurers
- make arrangements with other insurance companies to transfer a portion of their risk to the reinsurer
- the company transferring the risk is called the CEDING COMPANY and the company assuming the risk is the REINSURER
Captive Insurer
an insurer established and owned by the parent company to insure the parent company's loss exposure
Home Service Insurers (aka Industrial Insurance)
- sold by home service or debit life insurance companies
- face amounts are small (usually $1,000-$2,000) and premiums are paid WEEKLY
What is "Government Insurance" and what are the types of Government Insurance?
- protect against universal risks by redistributing income to help people who cannot afford the cost of incurring such losses themselves
TYPES:
(1) Social Security (Old Age Survivor Disability Insurance OASDI): provides income benefits for the elderly/retirement, survivors of those who died young, and those qualifying for federal disability
(2) Medicare: health insurance to CARE for the elderly (3) Medicaid: health insurance to AID the financially needy
(4) SGLI & VGLI (Serviceman's or Veteran's Group Life Insurance): life insurance for active and retired members of the military
(5) Tri-Care: health insurance for members of the military and their family
Self-Insurers
- retain risks and must have a large number of similar risks and enough capital to pay claims. however, they may save money if the loss experience is lower than the expected costs
- NOT a method of transferring risk, rather establish their won self-funded plan to cover potential losses
Self-funded plan
a plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues
Lloyd's of London
- NOT an insurance company
- members of the association for syndicates to underwrite and issue insurance (like coverage)
- a group of investors who share in unusual risk
Distribution Systems
- the ways insurance products are marketed and sold to the public
- insurance can be purchased through licensed insurance producers (either agents or brokers) or through
a number of other ways
- agents are either CAPTIVE/CAREER agents (work for only one insurer) or INDEPENDENT agents (work for themselves or for several insurers non-exclusively)
Career Agency System
- Commercial insurers establish offices in certain locations. Career agents are recruited to work at these locations.
- A general agent hires and trains new producers and supervises a number of other producers.
- All producers under the career agency system are captive agents and employees of the insurer
Personal Producing General Agency System
- agents work for an independent agency selling policies from several insurance companies
Commercial Insurers (Private Insurance Companies)
- in the business of selling insurance for a profit
- offer many lines of insurance aka multi-line (some sell primarily life insurance and annuities while other
sell accident and health insurance, or property and casualty insurance)
- function on the reimbursement approach
- typically lets policy owners assign benefit payments from the insurer directly to the health care provider, thus relieving the policy owner of first having to pay the medical care provider
- divided into two main groups: stock and mutual insurers
Multi-Line Insurer
an insurance company selling more than one line of insurance
ex: commercial insurers
Stock Companies
- one of two main groups of commercial insurance
- organized and incorporated under state laws for the purpose of making a profit for its stockholders (shareholders)
- sometimes called nonparticipating insurers because policyholders do not participate in receiving dividends or electing the board of directors, unless they are also a stockholder of the company
- when declared, stock dividends are paid to stockholders
- the directors and officers are responsible to the stockholders
- dividends are subject to taxation because they are considered profit
Mutualization
transformation of a stock insurer into a mutual insurer Mutual Companies
- owned by their policyholders
- known as participating insurers because policyholders participate in receiving dividends and electing the board of directors
- when declared, mutual company dividends are paid to the policyholders
- dividends are not subject to taxation because the dividends are considered to be a return of premium. the only exception is if the policy owner chooses to let the dividends sit and collect interest. (in this case,
only the accumulated interest would be taxable)
Mixed Insurer
- when a company operates as both a PARTICIPATING and NONPARTICIPATING insurer
True or False: Dividends can be guaranteed
False: dividends can NOT be guaranteed regardless of the company offering them
How are strong assessment mutual companies classified?
by the way they charge premium
A pure assessment mutual company
- operates based on loss-sharing by group members
- no premium is payable in advance. instead, each member is assessed an individual portion of losses that occur
An advance premium assessment mutual
- charges a premium at the beginning of the policy period
- if the original premiums exceed the operating expenses and losses, the surplus is returned to the policyholders as dividends. however, if total premiums are not enough to meet losses, additional assessments are levied against by the members
- normally, the amount of assessment that may be levied is limited either by state law or simply as a provision in the insurer's by-laws
Fraternal Benefit Societies
- special types of mutual companies (EX: nonprofit religious, ethnic, or charitable organizations) that provide insurance solely to their members
- must be formed for reasons other than obtaining insurance
Risk Retention Groups mutual companies formed by a group of people in the same industry or profession
EX: pharmacists, dentists, engineers
Service Providers
- offer benefits to subscribers in return for the payment of a premium
- benefits are in the form of services provided by hospitals and physicians in the plan
- these services are packaged into various plans and those who purchase the plans are known as the SUBSCRIBERS
- EX: Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO)
Reciprocal Insurers
- unincorporated groups of individual members that provide insurance for other members through indemnity contracts
- each member acts as both insurer and insured and are managed by Attorney in Fact
Reinsurers
- make arrangements with other insurance companies to transfer a portion of their risk to the reinsurer
- the company transferring the risk is called the CEDING COMPANY and the company assuming the risk is the REINSURER
Captive Insurer
an insurer established and owned by the parent company to insure the parent company's loss exposure
Home Service Insurers (aka Industrial Insurance)
- sold by home service or debit life insurance companies
- face amounts are small (usually $1,000-$2,000) and premiums are paid WEEKLY
What is "Government Insurance" and what are the types of Government Insurance?
- protect against universal risks by redistributing income to help people who cannot afford the cost of incurring such losses themselves
TYPES:
(1) Social Security (Old Age Survivor Disability Insurance OASDI): provides income benefits for the elderly/retirement, survivors of those who died young, and those qualifying for federal disability
(2) Medicare: health insurance to CARE for the elderly (3) Medicaid: health insurance to AID the financially needy
(4) SGLI & VGLI (Serviceman's or Veteran's Group Life Insurance): life insurance for active and retired members of the military
(5) Tri-Care: health insurance for members of the military and their family
Self-Insurers
- retain risks and must have a large number of similar risks and enough capital to pay claims. however, they may save money if the loss experience is lower than the expected costs
- NOT a method of transferring risk, rather establish their won self-funded plan to cover potential losses
Self-funded plan
a plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues
Lloyd's of London
- NOT an insurance company
- members of the association for syndicates to underwrite and issue insurance (like coverage)
- a group of investors who share in unusual risk
Distribution Systems
- the ways insurance products are marketed and sold to the public
- insurance can be purchased through licensed insurance producers (either agents or brokers) or through
a number of other ways
- agents are either CAPTIVE/CAREER agents (work for only one insurer) or INDEPENDENT agents (work for themselves or for several insurers non-exclusively)
Career Agency System
- Commercial insurers establish offices in certain locations. Career agents are recruited to work at these locations.
- A general agent hires and trains new producers and supervises a number of other producers.
- All producers under the career agency system are captive agents and employees of the insurer
Personal Producing General Agency System
- agents work for an independent agency selling policies from several insurance companies
