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RIBO LEVEL 1 > ch.1- Intro to General insuance > Flashcards

ch.1- Intro to General insuance Flashcards

1
Q

5 functions of insurance (SBELE/I)

A
  1. Spread of Risk
  2. Basis of credit system
  3. Eliminates worry, encourages entrepreneurship
  4. Loss prevention + Loss reduction
  5. Source of employment + Investing capital
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2
Q

Definition of insurance: 5 IMPORTANT POINTS

A

5 important points:

  1. shifting financial responsibility
  2. pmt only if risk/ peril occurs
  3. amt of pmt is amt req to indemnify/compensate victim
  4. covers losses to which object of insurance MAY be exposed
  5. indemnity- sum of money or other thing of value (repair/replace)
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3
Q

DEFINITION OF INSURANCE

A

Undertaking by 1 person to indemnify anther against loss/liability for loss in respect of a certain risk/peril to which the object of insurance may be exposed

or

to pay a sum of money or another thing of value upon the happening of a certain event

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4
Q

types of p+c insurance (3)-APL

A
  1. Auto: LARGEST single class of p+c
  2. Property: habitational + business properties
  3. Liability insurance: insured financially responsible for injury/damage to others
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5
Q

organization of insurance (2)- list

A
  1. private insurance
  2. government insurers
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6
Q

private insurers (2 types- list)

A
  • stock companies:
  • mutual companies:
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7
Q

Private insurers- 2 types + define

A

-stock companies:

  • get money from private funds/public sale
  • owned by shareholders
  • main purpose: profit

-mutual companies:

  • owned by policyholders
  • main goal: provide insurance as low a cost possible
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8
Q

Government insurers

A
  • federl/provincial
  • various plans: medical, emplpyment, workers comp
  • in BC/SK/MB/QC: provides compulsory auto ins. + competes w/ private insurance
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9
Q

How insurance distributed (3 ways)

A
  • direct writing systems
  • independent brokerage system
  • Agency system
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10
Q

Direct writing system

A
  • producers = employees -sell only products of insurer -salary, commission, or salary + bonys -insurer owns all business
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11
Q

Independent brokerage system

A
  • brokerage are owners- not emplpyees
  • owns all the business
  • represents multiple insurance co’s
  • paid commissions by insurer
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12
Q

Agency system

A
  • similiar to direct writers- rep 1 insurer
  • small biz owners
  • have onwers in the biz
  • commissions + bonus
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13
Q

Lloyd of london

A
  • not an insurance company
  • doesnt transact any business itsself
  • its a group of companies + individuals that assume risk thrmselves
  • syndicates: composed of underwriting members/names
  • underwriting agent: manages affairs of each syndicate + appoints expert underwriter
  • slip: producer provides broker w/ underwriting info in folded sheet of paper
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14
Q

Define:

risk

peril

A

insert pic

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15
Q

3 types of insurance incl in property and casualty (p and c) insurance

A

Auto

property

liability

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16
Q

Insurance agency and broker contracts- 5 segments

A

insert pic

  1. brokers authority
  2. ownership of expirations
  3. commissions
  4. expenses
  5. termination
17
Q

brokers authority

A
18
Q

ownership of expirations + billing procerues

A

insert pic

  • firm that retains ownership of client file controls placement of insurance for those clients

pemiums due to insurer 3 ways:

  1. account warrant
  2. insurer stmt
  3. direct bill
19
Q

commissions

A

insert pic

  • schedule vary
  • most btwn 10-20%
  • contingent profit of bonus commission:
    • based on performance+loss ratio
    • rewasrds broker for profitable book of biz
    • lower ratio, higher pay
20
Q

expenses

A
  • brokers usually responsible for ownership expenses
  • ins co MAY share in advertising
21
Q

Termination

A
  • require notice
  • usually 90-180 days
22
Q

Departments of isnurance company

A
  • Administration
  • claims
  • finance
  • Marketing
  • Underwriting

insert pics x2

23
Q

Reinsurance definition

A

1 insurer transfers/cedes to another insurer some/all obligation

24
Q

4 resons insurer would want reinsurance

A
  1. inreased underwriting capacity
  2. maintain proper reserves
  3. catastrophe protection
  4. retirement from a class of business
25
Q

capacity

A

amount of coverage insurer can reasonably assume

26
Q

premium capacity

A

aggregate premium volume insurer can safely write

27
Q

Risk

A

chance of financial loss

28
Q

Peril

A

an event that MAY cause a loss to occur

29
Q

Indemnity

A

to put you back in same financial position just prior to loss, no more, no less, no profit

RIBO LEVEL 1 (19 decks)

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