Basic Principles of Life and Health Insurance and Annuities

Question 1

State Guarantee Associations

Answer 1

Funded by insurance companies through Assessments and exist to protect consumers if an insurer becomes insolvent.

Question 2

Claim Settlement Practices

Answer 2

All state require promt, fair, and equitable claim settlement practices.

Question 3

Rating Services

Answer 3

The primary purpose of a rating company, such as AMs Best, Fitch Ratings, Standard & Poorś, and Moodyś is to determine the rated companies financial strength.
An insurers financial strength can be determined by looking at the companies reserves and liquidity.
Reserves are the accounting measurement of an insurerś future obligations to its policy holders.
Liquidity indicates a companyś ability to make unpredictable payouts to policy owners.

Question 4

NAIFA

Answer 4

National Association of Insurance and Financial Advisors

Question 5

NAHU

Answer 5

National Association of Health Underwriters

Question 6

NAIFA | NAHU

Answer 6

These organizations created a code of ethics detailing the expectations of agents in their duties towards clients.

Question 7

Agent marketing and sales practices

Answer 7

Selling to needs.

Finding the facts and educating the client

Question 8

Agent Marketing and Sales Practices

Answer 8

Suitability of recommended products.

• What are their needs? (clients)
• What products can meet those needs?
• Does the client understand the product?
• Is the client capable financially and other for managing product?
• If the product is the clients best interest?

Question 9

Agent marketing and sales practices

Answer 9

Full and accurate disclosure. The ethical agent makes it a practice to inform everything. All aspects including benefits and Limitations.

Question 10

Agent marketing and sales practices

Answer 10

Documentation.
The ethical agent documents each clients meeting and transaction. The agent uses fact-finding forms and obtains the clients written agreement for the needs determined, products recommended, and decision made. Some documentation is required by law.

Question 11

Agent Marketing and Sales Practices

Answer 11

Client Services.
A sale does not mark and end of a relationship with a client, but rather the beginning. Routine follow-ups (calls and correspondance) are recommended to ensure that the clients needs are always covered, and products in place are still suitable.

Complaints are handled promptly and thoroughly

Question 12

Producer Responsibility

Answer 12

• To help all company customers with the best service possible.
• Solicit new business for the company
• By assisting clients in acquiring products
• Guide clients to the right products to meet their needs and maintain a regular relationship
• Diligent assist in the claims process, keep clients informed during process and help ensure a prompt and equitable claims experience
• The producer must be acutely aware of company underwriting guidelines to minimize wasting the underwriters valuable time and skills on poorly matched products and customer and assist the underwriter in a way to facilitate the application process.

Question 13

Insurance

Answer 13

Transfer of risk from one party to another through a legal contract or the transfer of risk through the pooling (accumulation) of funds

Question 14

Benefit of Insurance

Answer 14

Most contracts offered to individuals and organizations in society, including health, property, and casualty policies, are contracts of indemnity who´s primary purpose is to pay off financial loss and to reimburse the insured.

Question 15

Practice Solutions

Answer 15

Insurance evolved to produce a practical solution to economic uncertainties and losses.

Question 16

Multi-Line insurers

Answer 16

Companies that sell more than one line of insurance

Question 17

Stockholders

Answer 17

May or may not be policyholders

Question 18

Life Insurance

Answer 18

Creates an instant estate, regardless of when death occurs.

Question 19

Private V.S Government Insurance

Answer 19

There are two (2) types of insurance

Question 20

Stock Companies

Answer 20

Issues nonpracticing insurance policies

Question 21

Nonparticipating

Answer 21

Policies that do not allow policyholders to participate in the company by electing the board of directors and receiving dividend from divisible surplus.

Question 22

Divisible Surplus

Answer 22

The amount of earnings paid to policy owner´s as dividends after the company sets aside funds require to cover reserves, operating expenses, and general business purposes.

Question 23

Pure Assessment Mutual Company

Answer 23

Operates on a basis of loss-sharing by group members

Question 24

Risk Retention Group

Answer 24

Risk purchasing group only has to be licensed in one state but may insure in any state.

Question 25

Reciprocal Insurers

Answer 25

Organized on the basis of ownership by their policyholders.

Question 26

Fraternal Benefit Society

Answer 26

The organization must be nonprofit, have a lodge system that includes ritualistic work, and maintain a representative form of government with elected officers.

Question 27

Lloys of London

Answer 27

A syndicate of individuals and companies that individually underwrite insurance

Question 28

Ceding Company

Answer 28

Company transferring the risk

Question 29

Reinsurer

Answer 29

Company assuming the risk

Question 30

Primary Insurer

Answer 30

In a reinsurance agreement, the insurance company that transfers its loss exposure to another insurer.

Question 31

Treaty Insurer

Answer 31

Includes an automatic sharing of the risk assumed

Question 32

Captive Insurer

Answer 32

An insurer established and owned by a parent company for the purpose of insuring the parent companies loss exposure.

Question 33

Surplus Lines

Answer 33

The non-traditional market

Question 34

Facultative Reinsurance

Answer 34

When a ceding insurer transfers a potion of its risk to an assuming insurer on a case by case basis.

Question 35

Treaty Insurance

Answer 35

A reinsurance contract between two insurers involves an automatic sharing of the risk assumed.