1 Flashcards
1
Q
Sharing the losses of a few people amongst the many
A
Insurance
2
Q
The chance of loss
A
Risk
3
Q
Type of risk that offers the chance for loss or profit
A
Speculative Risk
4
Q
Type of risk that can only offer loss, not gain
A
Pure risk
5
Q
True or false: insurance is pure risk
A
True
6
Q
An event that may cause a loss
A
Peril
7
Q
2 Elements of an insurance contract
A
- Must be a future event
- The future event must be fortuitous (accidental)
8
Q
Anything of value received to bind a contract
A
Consideration
9
Q
2 Types of Loss
A
- Direct Loss
- Indirect Loss
10
Q
3 Categories of Risk
A
- Personal Risk -bodily injury, loss of life or income
- Property Risk - damage to property
- Liability Risk - loss or damage to a third party
11
Q
A contract, expressed or implied, to repay in the event of a loss.
A
Indemnity
12
Q
3 Parties to an Insurance Contract
A
- First party: the insured
Purchases insurance, wants protection, client - Second party: the insurer
Insurance Company - Third party: anyone who claims against the insured’s policy
Liability; person injured by you
Not involved in setting up a policy, only in claim
13
Q
Replacement Cost – Depreciation
A
Actual Cash Value
14
Q
The share of the premium allowed to the brokerage/broker/agent for having produced the business
A
Commission
14
Q
The current cost of replacing an article with a similar one of the same condition, taking into account factors that may augment or lower value
A
Actual Cash Value
15
Q
The amount the insured must pay
A
Policy premium
16
Q
The portion of the premium the brokerage/broker/agent has to submit to the insurer
A
Net Premium
17
Q
What does IBC stand for
A
Insurance Bureau of Canada
18
Q
Advocates and promotes industry positions and a better understanding of the insurance business
A
Insurance Bureau of Canada
19
Q
Provides a forum to identify issues and develop policy
A
Insurance Bureau of Canada
20
Q
Studies legislation and legislative proposals that effect insurance companies and stays on top of issues
A
Insurance Bureau of Canada
21
Q
the capacity to confirm to people who have submitted insurance applications that they have coverage
A
binding authority
22
Q
gives agents and brokers the power to make decisions that enter insurers into contracts of insurance.
A
binding authority
23
Q
A notice and confirmation to the insurer that it has been bound to a contract of insurance
A
Cover Note
24
A written or oral agreement given to the insured which confirms that insurance coverage is in effect.
Binder
25
The physical link between insurers and consumers. They have specialized knowledge
Intermediaries
26
Types of Intermediaries
1. Brokers
2. Agents
3. Adjusters
27
Licensed independent business person who places business with any number of insurers for the insured
Broker
28
An intermediary that represents only one insurance company or only sells life insurance
Agent
29
Intermediaries between the insurance company and customers who deal with claims settlement.
Adjusters
30
True or False: Adjusters are not employed by any one insurance company
True
31
Broker/Agent account where premiums are collected and deposited; cant touch apart from insurers being paid for policies issued
Trust account
32
Broker/Agent general business account from which operating expenses are withdrawn and commissions deposited
Operating account
33
Quebec term for contract
Mandate
34
Quebec term for Principal
Mandator
35
Quebec term for Agent
Mandatory
36
Our contract with the insurer for selling and servicing on their behalf
Principal-Agent Contact
37
3 Parties to the Principal-Agent Contract
1st party: Principal (insurer)
2nd party: Intermediary (agent/broker)
3rd party: Insured
38
This refers to how the loss paid out to claims should not be greater than the premiums taken in
Loss ratio
39
What is it called when insurance companies are making money off the premium collected
Underwriting gains
40
The amount of money an insurance company charges to provide coverage for a specific item or policy
Premium
41
The price of a unit of insurance for one year
Rate
42
The process of establishing rates for each class of insurance. It is determining the cost of a specified unit of insurance for a given time.
Ratemaking
43
An organization that employs independent business people who operate with one or more insurance companies in order to place business.
Brokerage
44
3 Classes of Insurance Risk
1. Personal lines (stuff)
2. Commercial lines (businesses)
3. Special risks (large industrial stuff, amusement parks)
45
Assuming risk by setting aside a pool of money to use for compensation in case something happens
Self-insurance
46
3 ways of dealing with risks
E – Eliminate or reduce risk
A – Assume or retain risk
T – Transfer risk
47
Past claims dictate future claims
The Principle of Probability
48
It states that a bigger sample size decreases uncertainty.
The Law of Large Numbers
49
Three types of basic fire and EC policy:
1. Standard policy (aka Named Perils form)
2. Broad policy
3. Comprehensive policy (aka All Risk)
50
Type of basic fire and EC policy that covers the listed perils, and both building and contents are covered
Standard policy (aka Named Perils form)
51
Type of basic fire and EC policy that covers the contents of the building for what’s named and
All Risk on the building itself
Broad policy
52
Type of basic fire and EC policy that lists only the perils you aren’t covered for.
Comprehensive policy
53
Basic Fire Coverage includes what coverages?
Fire
Lightning
Explosion (limited – only coal, natural gas, and manufactured gas)
54
What are included in the Basic Fire and Extended Coverage Perils
Windstorm and hail
Water escape/rupture/freezing
Falling object
Lightning
Impact by aircraft or land vehicle
Vandalism and malicious acts
Explosion
Riot
Smoke
Fire
(LIVerSWwF)
55
A condition that may cause a loss to occur or make the loss more severe
hazard
56
2 Types of Hazard
1. Moral
2. Physical
57
A hazard that relates to condition or pertains to property
Physical hazard
58
A hazard that relates to the human element, Attitudes and behaviours, character
Moral Hazard
59
A material fact can change one of these three things:
1. The acceptability of risk
2. The amount of premium to be charged
3. The conditions applicable to accepting risk (that is, the type of coverage offered)
60
It would affect a contract of insurance enough to influence an insurer’s decision on whether to accept the risk.
Material Fact
61
Incorrect or missing information.
Misrepresentation
62
Intentionally withholding information
Concealment
63
It could be innocent or intentional, but it counts as concealment because of a lack of doing due diligence on what was required to be known.
Non-disclosure
64
A legal principle calling for the highest standards of integrity on the part of the insured and the insurer.
Utmost good faith
65
What are the 6 functions of insurance? (SALSAS)
1. Spread of risk
2. Aid to security
3. Loss prevention activities
4. Source of Capital
5. Aid to credit
6. Source of employment
66
3 Considerations to achieve spread of risk
1. Volume – insure a large number of risks
2. Diversity of type of risk – insure as many different kinds of risk as possible
3. Diversity of location – insure as many different locations as practicable
67
The premium required to meet losses that occur
Pure premium
68
An extra commission paid annually to a broker or an agent if the business placed by the broker or agent produced a certain level of profitability for the insurer.
Contingent Commission aka Profit Commission
69
A relationship based on trust and good faith and requires that the agent/broker acts in the best interest of the customer.
Fiduciary duty
70
The responsibilities of Agents and Brokers are to:
1. Act within the terms of their contract
2. Follow instructions as to types of businesses that may be written
3. Collect premiums and hold them in trust
4. Remit premiums
5. Advise the insurer of business written promptly
6.Advise the insurer promptly of all claims notified
71
True or false: The regulation of all insurance intermediaries falls under provincial jurisdiction.
True
72
Who is the regulator of Insurance in Ontario?
RIBO
73
What does RIBO stand for?
Registered Insurance Brokers of Ontario
74
How are intermediaries regulated? (QLOR)
(5-10)
Qualification
Licensing
Operating requirements
Renewal of license
75
Large companies appoint independent brokers to be their sales force and bring clients to them. They pay commission for policies issued
The client list belongs to the broker, not the insurer.
(5-4)
Independent brokerage system
76
They market their policies through exclusive agents who represent only one company.
(5-4)
Exclusive Agency Companies
77
The expressed will of society governing relationships among members of that society.
Law
78
The two basic systems of law
1. Civil Code (Quebec)
2. Common Law (everywhere else)
79
True or false: Common law is more restrictive because civil code has more room for interpretation
true
80
The 2 classes of Law
1. Criminal law (murder, burglary)
2. Civil law / Private law (lawsuits and losses)
81
True or false: Insurance is concerned with civil law
True
82
This is also known as a legal wrong
Tort
83
The danger of a loss, particularly fire, arising from what happens to another risk close by.
Exposure
84
The sum total of values which, if damaged or destroyed, would cause loss under a policy – the value of everything a policy insures.
Exposure
85
The words or paragraphs in a policy or endorsement which describe some specific coverage or limitation or modification
Clauses
86
States that the client is responsible for paying the deductible, whether or not they are at fault.
Deductible clause
87
Agreed specified amount that the insured must pay on a claim benefit before the insurance company will cover the rest of the claim.
Deductible
88
The amount of loss that the insured is responsible for.
Deductible
89
This clause states that somebody other than the insured has a financial interest in the property insured.
Loss Payable Clause
90
