Solution Manual: Health
Economics, 1st Edition
Non-admitted - ANSWERSunauthorized-insurance company not required to have a Certificate of
Authority from the state
Surplus Lines - ANSWERS- Insurance sold by unauthorized/nonadmitted insurers; if on the state's
approved list of surplus insurers
- Can only be sold to certain high risk insureds
- Cannot be sold solely for a cheaper rate than licensed/admitted insurers
Financial Strength Rating - ANSWERSa report card of the company
Methods of Marketing - ANSWERSIndependent
Exclusive or Captive
General Agents or Managing General Agents
Direct-writing companies
Direct Response - no agent/producer involved
Agency - ANSWERSthe insurance agent acts on behalf of the principal (insurance company)
Agent Authority - ANSWERSExpress - What the agents written contract with the company says.
Implied - Not written but are the things agents normally do to sell insurance.
Apparent - Things the agent does that a reasonable person would assume as authority, based on the
agents' actions and statements.
Fiduciary Trust - ANSWERS- Promptly sends premiums to insurer
- Knowledge of products
- Comply with laws and regulations
- No commingling
Legal Contract (CLOAC) - ANSWERSConsideration - Give something of value
,Legal Purpose - Risk transfer doesn't violate the law
Offer - (made by insurer)
Acceptance - Insurer accepts risk as presented
Competent parties - insured age 18 and sane
Adhesion - ANSWERS- Policy written by the insurance company
- If ambiguous (not clear) - court will take the side of the insured
Aleatory - ANSWERSnot equal value - small premium for a large amount of coverage
Utmost Good Faith - ANSWERSthe insured and insurance company have a right to expect honesty
from each other
Unilateral - ANSWERSOnly ONE promise made. Insurance company PROMISES to pay for a covered
loss. Insured does NOT promise to pay the premium
Personal - ANSWERScontract between the insurance company and the insured; cannot be changed
to someone else
Conditional - ANSWERSinsured must pay the premium for coverage and file a claim if a loss occurs
Indemnity - ANSWERSpay for the loss but with no gain
Representation - ANSWERSbelieved to be true
Insurance - ANSWERSTransfer of risk
Risk - ANSWERSuncertainty/possibility of a loss
Speculative Risk - ANSWERSchance of loss or gain; not insurable
Pure Risk - ANSWERSChance of loss only. Insurance companies will insure
, Exposure - ANSWERSrisks for which the insurance company would be liable
Peril - ANSWERSa cause of loss
Hazard - ANSWERSsomething that causes an increase in the chance of loss
Physical Hazard - ANSWERSthe hazard can be seen
Moral Hazard - ANSWERSa belief that intentionally causing a loss is acceptable
Morale Hazard - ANSWERScarelessness
STARR! - ANSWERSmethods of handling risk.
Sharing, Transfer, Avoidance, Retention, Reduction
Contract (policy) - ANSWERSan agreement between the insured and the insurer
Law of Large Numbers - ANSWERSthe larger the group; the more accurate losses can be predicted
CANHAM - ANSWERSthat can be insured have the following characteristics
Calculable, Affordable, Non-Catastrophic, Homogeneous, Accidental, Measurable
Adverse Selection - ANSWERSrisks that have a greater than average chance of loss
Reinsurance - ANSWERSan insurance company (the ceding company) paying another insurance
company (reinsurer) to take some of the companies risk of catastrophic loss
Stock Insurer - ANSWERSPublically owned by stockholders/shareholders.
Economics, 1st Edition
Non-admitted - ANSWERSunauthorized-insurance company not required to have a Certificate of
Authority from the state
Surplus Lines - ANSWERS- Insurance sold by unauthorized/nonadmitted insurers; if on the state's
approved list of surplus insurers
- Can only be sold to certain high risk insureds
- Cannot be sold solely for a cheaper rate than licensed/admitted insurers
Financial Strength Rating - ANSWERSa report card of the company
Methods of Marketing - ANSWERSIndependent
Exclusive or Captive
General Agents or Managing General Agents
Direct-writing companies
Direct Response - no agent/producer involved
Agency - ANSWERSthe insurance agent acts on behalf of the principal (insurance company)
Agent Authority - ANSWERSExpress - What the agents written contract with the company says.
Implied - Not written but are the things agents normally do to sell insurance.
Apparent - Things the agent does that a reasonable person would assume as authority, based on the
agents' actions and statements.
Fiduciary Trust - ANSWERS- Promptly sends premiums to insurer
- Knowledge of products
- Comply with laws and regulations
- No commingling
Legal Contract (CLOAC) - ANSWERSConsideration - Give something of value
,Legal Purpose - Risk transfer doesn't violate the law
Offer - (made by insurer)
Acceptance - Insurer accepts risk as presented
Competent parties - insured age 18 and sane
Adhesion - ANSWERS- Policy written by the insurance company
- If ambiguous (not clear) - court will take the side of the insured
Aleatory - ANSWERSnot equal value - small premium for a large amount of coverage
Utmost Good Faith - ANSWERSthe insured and insurance company have a right to expect honesty
from each other
Unilateral - ANSWERSOnly ONE promise made. Insurance company PROMISES to pay for a covered
loss. Insured does NOT promise to pay the premium
Personal - ANSWERScontract between the insurance company and the insured; cannot be changed
to someone else
Conditional - ANSWERSinsured must pay the premium for coverage and file a claim if a loss occurs
Indemnity - ANSWERSpay for the loss but with no gain
Representation - ANSWERSbelieved to be true
Insurance - ANSWERSTransfer of risk
Risk - ANSWERSuncertainty/possibility of a loss
Speculative Risk - ANSWERSchance of loss or gain; not insurable
Pure Risk - ANSWERSChance of loss only. Insurance companies will insure
, Exposure - ANSWERSrisks for which the insurance company would be liable
Peril - ANSWERSa cause of loss
Hazard - ANSWERSsomething that causes an increase in the chance of loss
Physical Hazard - ANSWERSthe hazard can be seen
Moral Hazard - ANSWERSa belief that intentionally causing a loss is acceptable
Morale Hazard - ANSWERScarelessness
STARR! - ANSWERSmethods of handling risk.
Sharing, Transfer, Avoidance, Retention, Reduction
Contract (policy) - ANSWERSan agreement between the insured and the insurer
Law of Large Numbers - ANSWERSthe larger the group; the more accurate losses can be predicted
CANHAM - ANSWERSthat can be insured have the following characteristics
Calculable, Affordable, Non-Catastrophic, Homogeneous, Accidental, Measurable
Adverse Selection - ANSWERSrisks that have a greater than average chance of loss
Reinsurance - ANSWERSan insurance company (the ceding company) paying another insurance
company (reinsurer) to take some of the companies risk of catastrophic loss
Stock Insurer - ANSWERSPublically owned by stockholders/shareholders.
