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General Insurance - NC License

Terms in this set (79)

Medicare
A federal insurance program that provides medical care benefits to covered workers (retirees).
Fraternal Insurance Company
A non-profit form of insurance provider sponsored by an organization of people who share a common ethnic, religious, or vocational affiliation.
Medicare part A
hospital care
Medicare part B
Physician and lab care
Medicare part C
Managed care alternative to part A & Part B
Medicare part D
Drugs
Social Security (OASDI)
A federal insurance program that provides disability, death, and retirement benefits to covered workers and their qualifying beneficiaries.
Managerial System
form employs sales representatives through regional offices or agencies headed by a general manager (GM), who is an employee of the insurer.
General Agency
form uses an independent contractor (called a general agent, or GA) to produce its business. The GA is not an employee of the insurer.
NAIC - National Association of Insurance Commissioners
represents the insurance department of every state, the District of Columbia, and several U.S. territories. It meets to promote uniformity through development of model insurance regulations.
Loss
An unplanned reduction in economic value resulting from the occurrence of a covered peril.
Direct Loss
the immediate result of an event involving an insured peril
(death ,disability)
Indirect Loss
more remote but may still be considered an insured loss.
(loss of income due to death or disability)
Risk Retention Group (RRG)
A group of businesses or professional firms that self-insure their life and health insurance needs and use the services of an insurance company to manage the administrative tasks of doing so.
Indemnity Contract
indemnifies (i.e., reimburses) the insured for the actual value of the loss. Its benefits cannot exceed the amount of the loss (or the maximum policy benefit amount, if less). Medical expense insurance policies are indemnity contracts that reimburse insureds for their incurred medical expenses.
Valued Contract
A policy that pays a stated face amount regardless of the perceived value of the loss
Stock Insurance Company
A form of insurance company that is owned by stockholders who may or may not also be policyowners. May distribute stock dividends (taxable).
Two related insurance company functions. Through the process of _________, applications are assessed for insurability and to assign premium rates. The ________ department analyzes data to help estimate future losses and to produce rate tables.
underwriting vs actuarial departments
Buyers Guide
given at the beginning of the buying process, explains the general features and conditions of the type of insurance being considered
Policy Summary
given with the signed application, provides detailed information about the policy being purchased.
Representations
statements the applicant makes on an application that are deemed to be true to the applicant's best knowledge
Warranties
statements the insurer makes in the contract
Not all risks are insurable. Those that meet five insurability criteria are known as an ________ risk.
Insurable
5 Criteria for Insurable Risk
1. Definable & Measurable
2. Accidental/Outside insured's control
3. Risk must be shared by a large group of similar risks
4. Loss must NOT be catastrophic
5. Risk must not be excluded from coverage
Risk
A basic insurance term referring to the possibility of incurring a loss.
Pure risk (loss only)
untimely death, disability ; ONLY pure risk is insurable
Speculative Risk (loss or gain)
gambling, stock investments
Aleatory Contract
A contract in which one party may receive a benefit that is entirely out of proportion to the consideration given. This is the opposite of a commutative contract, in which each party to the contract expects to receive something of equal value from the other party.
Morbidity Table
A table, compiled by health insurance company actuaries, showing the likelihood of becoming disabled or seriously ill because of sickness or accident at any age up to 100.
The three basic forms of agent authority are _________, _________, and __________.
Apparent, Implied, & Express
Express Authority
The contract between the producer and insurer sets forth certain acts and duties the producer is expressly authorized to perform.
Implied Authority
insurers allow their producers to engage in many sales-related activities not expressly listed in any agreement but that are recognized as essential to the job
Apparent Authority
the third level of binding authority, is the one that is most likely to lead to problems for both the insurer and the producer. It is authority that:

*the contract does not provide
*the insurer does not intend
reasonably appears to the customer to be granted by the insurer based on the producer's statements and the actions (or inactions) of the insurer
Underwriting
The process by which an insurance company assesses an application to determine if it represents an insurable risk.
Law of Large Numbers
A mathematical principle that is the basis for predicting the odds of a loss occurring in a certain population in any given year.
Errors and omissions (E&O) insurance
Liability insurance that protects producers from liability that may arise due to professional services they rendered in error or failed to render.
An insurer that has a certificate of authority in a given state is said to be an___________ insurer in that state.
Admitted Insurer
Five basic elements of a valid contract
Offer, acceptance, consideration, competent parties, and legal purpose
Reinsurance
The process through which insurance companies spread large risks among other insurers.
Surplus (Excess) Lines Insurance
A market for insurance, using non-admitted insurers, that is not available through any admitted companies in a state.
Insurers can be categorized by their state of domicile. There are three categories, known as _____, _____, and _____.
Domestic, foreign, Alien
Adverse selection
The tendency of persons at greater risk of loss to seek out and maintain insurance.
Waiver
when one party to a contract knowingly gives up (waives) a right, either by its actions or its inactions
Estoppel
the legal inability to impose a right once it has been waived
Mortality Table
A table, compiled by insurance company actuaries, showing the predicted number of deaths at every age from birth to age 100 (or, increasingly, age 120).
Risk Management
The natural process by which people contend with the perils faced daily, of which there are five common techniques.
Five techniques of risk management
avoidance
reduction
retention
sharing
and transfer.
Concealment
The willful nondisclosure of material facts on an application for the purpose of obtaining insurance.
Independent Agency System
An insurance distribution system in which the manager and producers are fully independent and not affiliated with any single insurer.
Peril
the immediate cause of a loss (and the event that is insured against).
Hazard
is any condition that increases the risk of incurring a loss.
Contract of Adhesion
A type of contract in which one party drafts the terms that must be accepted as-is by the other party.
Mutual Insurance Company
A form of insurance company that is owned by policyowners. May distribute policy dividends (non-taxable) through participating policies.
Two basic types of insurance producer: an ______ represents a single insurer and a _____ sells policies from multiple insurers.
Agent & Broker
Moral hazards
character weaknesses, habits, and risky activities that increase the possibility of loss. Underwriters look for clues that suggest the applicant's lifestyle could result in a loss, such as DUI convictions for drinking and driving, excessive alcohol consumption, smoking, and reckless drug use
Morale hazards
state of mind or attitudes that create an indifference to loss. Disregarding one's health (e.g., being overweight or inactive), driving recklessly, and generally being less careful because "I have insurance for that"
Physical Hazards
physical conditions that increase the chance of loss. Working in dangerous conditions (e.g., coal mining and heavy construction) and engaging in dangerous activities like rock climbing
Risk avoidance
a reasonable strategy to deal with dangerous hazards

like: refusing to operate a vehicle after drinking alcoholic beverages
Risk Reduction
reduce exposure to its related hazards

like: Exercising regularly, avoiding poor health habits,
Risk Retention
the acceptance of risk and dealing with a loss using personal funds

if the loss is small this makes sense to do, but if its high this could lead to big problems
Risk Sharing
people who shared a common risk banded together and "chipped in" to compensate a member of the group who suffered a covered loss
Risk Transfer
transferring the loss to a third party—is the basis for most insurance today
Two types of commercial insurance companies
1. Stock
2. Mutual
HMOs, and Blue Cross/Blue Shield organizations are examples of what type of care providers?
Managed Care service providers
Self-Insurers
any organization that "insures" itself, typically by paying for smaller losses with its own money. It is an example of the risk retention approach to risk management.
Non-admitted Insurer
insurer that is not certified to do business in a state
An insurance company that is in the state that it is headquarterd is classified as?
Domestic company
An insurance company that is in every state outside of its state domicile is classified as?
Foreign company
An insurance company that is domiciled outside of the United States is classified as?
Alien company
A.M Best, Standard & Poors, Moody's, Duff & Phelps are all what?
the most well-known and respected rating agencies
Career (or captive) agency system
This distribution system uses licensed producers called agents who primarily, if not exclusively, represent one insurer
General Agency System
The agency head is an independent contractor (called a general agent, or GA) who employs agents. The GA is responsible for agency expenses and staffing and is not an employee of the insurer.
Direct response system
Insurers using the direct response method sell directly to consumers, without the use of external agents or brokers, through mail, radio, television, and Internet advertising
Law of Agency
a set of common law rules that define the legal relationship between two parties: a principal and an agent.
Rebating
refunding or offering to refund a portion of the premium or anything of value in return for the applicant's purchase of a policy
Five elements of a legal contract
Offer and Acceptance
Consideration
Competent Parties
Legal Purpose
Unilateral Contract
contract in which only one party (the insurer) makes a legally enforceable promise; promise to pay benefits if an insured loss occurs
An insurance contract requires that both the policyowner and the insurer act in _____ _____ _____.
Utmost good faith
Recession
the act of declaring that an insurance policy was never in effect
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