Indemnification - ANSWER Cannot collect more than your actual loss under
this definition.
Deductibles - ANSWER Portion of covered expenses the insured must
pay/satisfy before the insurer pays. Lowering the deductible would cause an
increase in claims and premiums. Raising the deductible would cause a decrease in
claims and premiums. The purpose is to eliminate nuisance claims, to keep
premiums affordable, and to make the insured more careful about loss control
Reinsurance - ANSWER The process of the insurer ceding (transferring) all or
part of the risk to another insurer so that they share the risk. The insurer
transferring the risk is known as the ceding or primary insurer, and the party
agreeing to accept all or a portion of the risk is known as the reinsurer
Purpose of Reinsurance - ANSWER Used to spread risk, insure large risks
safely, any type of policy can be reinsured, solves problems with unearned
premium, most reinsurance is treaty (automatic), not specific/facultative, and helps
insurers avoid capacity problems
Self-funding - ANSWER Risk retention. The owner/employer pays for claims
out of pocket. Two very important characteristics must be present: The loss must
,be predictable and known, and based on a large number of homogeneous exposure
units (predictability). Sufficient liquid assets to pay claims and other costs of
retaining the risk
Type of agreement restores someone to the same condition as prior to the loss? -
ANSWER Contract
An agreement in which an insurer contracts with a third party to insure itself
against losses from insurance policies it issues is known as: -
ANSWER Reinsurance
The insurer that cedes a portion of the risk is known as the: -
ANSWER Reinsurer
Four Major Categories of Insurers - ANSWER Property insurance, Casualty
Insurance, Life Insurance, and Accident/health insurance
Property insurance - ANSWER Covers direct and indirect losses- referred to as
first party insurance/coverage
Casualty insurance - ANSWER Includes a wide variety of unrelated coverages
such as auto, workers comp, general liability, crime insurance, aviation insurance,
surety bonds, etc...
life insurance - ANSWER Provides death benefits, annuities, lifetime income
, Accident and health insurance - ANSWER Protects against loss caused by
injury, illness, accidental death, and disability income
The 22 classes/lines of Insurance - ANSWER Life, Fire (property), Marine
(boat), Title (not free and clear), Surety (Bonds), disability (injury/sickness), plate
glass (glass that breaks), liability (injury), workers comp (injury on job), common
carrier (liability of goods), boiler/machinery (explosion of tanks/pipes), burglary
(theft), credit, sprinkler, team (loss caused by use of teams), auto, mortgage,
aircraft, mortgage guarantee, insolvency, legal, misc. (eq, flood)
Private insurer and Government Insurers - ANSWER Insurance is provided to
the public by two major sources, private and the US Government. Two major
insurers are Stock and Mutual
Stock insurer - ANSWER Non-participating! stockholders, shareholders,
stakeholders own and elect the board of directors (dividends are taxable equal
return of profit)
Mutual insurer - ANSWER Participating. Policyholders and buyers elect the
board of directors. (Dividends not taxable equals return of premium)
Demutualization - ANSWER When a mutual insurer becomes a stock insurer
reciprocal, aka inter-insurance exchange - ANSWER Subscribers exchange
insurance on one another (both insured and insurer).
, Lloyd's of London - ANSWER Not an insurance company!! A physical meeting
place made up of individuals who form syndicates
Fraternal - ANSWER Organized on the basis of a lodge, society, or order. Sell
the members
Captive insurer - ANSWER Company/organizations/group of affiliates, forms a
subsidiary. The purpose of having the subsidiary provide all insurance for the
parent company
Service organization - ANSWER Blue Cross/Blue Shield and HMO. Pay
directly to the provider of the service (most are non-profit). non commercial
Reinsurers - ANSWER Insurers or 3rd parties that accept all or a portion of the
risk from the ceding/primary insurer. The primary/ceding insurer pays the claim.
The reinsurer reimburses for the portion that is reinsured
Excess and surplus lines insurers - ANSWER Speciality insurer where there is
no market through the original producer or which is not available through
admitted. Placed through a surplus lines broker
Self insurer - ANSWER The business or individual chooses to self insurer. Risk
is not insured!
Risk Retention Groups - ANSWER Providers of insurance must be licensed and
authorized as liability insurers in at least one state where they operate. Can transact
in all other states
this definition.
Deductibles - ANSWER Portion of covered expenses the insured must
pay/satisfy before the insurer pays. Lowering the deductible would cause an
increase in claims and premiums. Raising the deductible would cause a decrease in
claims and premiums. The purpose is to eliminate nuisance claims, to keep
premiums affordable, and to make the insured more careful about loss control
Reinsurance - ANSWER The process of the insurer ceding (transferring) all or
part of the risk to another insurer so that they share the risk. The insurer
transferring the risk is known as the ceding or primary insurer, and the party
agreeing to accept all or a portion of the risk is known as the reinsurer
Purpose of Reinsurance - ANSWER Used to spread risk, insure large risks
safely, any type of policy can be reinsured, solves problems with unearned
premium, most reinsurance is treaty (automatic), not specific/facultative, and helps
insurers avoid capacity problems
Self-funding - ANSWER Risk retention. The owner/employer pays for claims
out of pocket. Two very important characteristics must be present: The loss must
,be predictable and known, and based on a large number of homogeneous exposure
units (predictability). Sufficient liquid assets to pay claims and other costs of
retaining the risk
Type of agreement restores someone to the same condition as prior to the loss? -
ANSWER Contract
An agreement in which an insurer contracts with a third party to insure itself
against losses from insurance policies it issues is known as: -
ANSWER Reinsurance
The insurer that cedes a portion of the risk is known as the: -
ANSWER Reinsurer
Four Major Categories of Insurers - ANSWER Property insurance, Casualty
Insurance, Life Insurance, and Accident/health insurance
Property insurance - ANSWER Covers direct and indirect losses- referred to as
first party insurance/coverage
Casualty insurance - ANSWER Includes a wide variety of unrelated coverages
such as auto, workers comp, general liability, crime insurance, aviation insurance,
surety bonds, etc...
life insurance - ANSWER Provides death benefits, annuities, lifetime income
, Accident and health insurance - ANSWER Protects against loss caused by
injury, illness, accidental death, and disability income
The 22 classes/lines of Insurance - ANSWER Life, Fire (property), Marine
(boat), Title (not free and clear), Surety (Bonds), disability (injury/sickness), plate
glass (glass that breaks), liability (injury), workers comp (injury on job), common
carrier (liability of goods), boiler/machinery (explosion of tanks/pipes), burglary
(theft), credit, sprinkler, team (loss caused by use of teams), auto, mortgage,
aircraft, mortgage guarantee, insolvency, legal, misc. (eq, flood)
Private insurer and Government Insurers - ANSWER Insurance is provided to
the public by two major sources, private and the US Government. Two major
insurers are Stock and Mutual
Stock insurer - ANSWER Non-participating! stockholders, shareholders,
stakeholders own and elect the board of directors (dividends are taxable equal
return of profit)
Mutual insurer - ANSWER Participating. Policyholders and buyers elect the
board of directors. (Dividends not taxable equals return of premium)
Demutualization - ANSWER When a mutual insurer becomes a stock insurer
reciprocal, aka inter-insurance exchange - ANSWER Subscribers exchange
insurance on one another (both insured and insurer).
, Lloyd's of London - ANSWER Not an insurance company!! A physical meeting
place made up of individuals who form syndicates
Fraternal - ANSWER Organized on the basis of a lodge, society, or order. Sell
the members
Captive insurer - ANSWER Company/organizations/group of affiliates, forms a
subsidiary. The purpose of having the subsidiary provide all insurance for the
parent company
Service organization - ANSWER Blue Cross/Blue Shield and HMO. Pay
directly to the provider of the service (most are non-profit). non commercial
Reinsurers - ANSWER Insurers or 3rd parties that accept all or a portion of the
risk from the ceding/primary insurer. The primary/ceding insurer pays the claim.
The reinsurer reimburses for the portion that is reinsured
Excess and surplus lines insurers - ANSWER Speciality insurer where there is
no market through the original producer or which is not available through
admitted. Placed through a surplus lines broker
Self insurer - ANSWER The business or individual chooses to self insurer. Risk
is not insured!
Risk Retention Groups - ANSWER Providers of insurance must be licensed and
authorized as liability insurers in at least one state where they operate. Can transact
in all other states
