Chapter 1 Keywords

Question 1

What is the Actuarial department?

Answer 1

The actuarial department calculates policy rates, reserves, and dividends.

Question 2

Define: Alien Insurer

Answer 2

An Alien Insurer is an insurer that is authorized in any state within the U.S., but its principal office is located outside this country

Question 3

Define: Admitted Insurer

Answer 3

An admitted or authorized insurer is an insurer who has received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state

Question 4

Who does the broker represent?

Answer 4

represent themselves and the insured (the client or customer)

Question 5

Define: Captive Insurer

Answer 5

an issuer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure

Question 6

Define: Certificate of Authority

Answer 6

is a license issued to an insurer by a department of insurance (or equivalent state agency) that authorizes that company to conduct insurance business in that particular state

Question 7

What is the claims department?

Answer 7

The claims department is responsible for processing, investigating, and paying claims

Question 8

Define: Divisible Surplus

Answer 8

is the amount of earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes

Question 9

Define: Domestic Insurer

Answer 9

is an insurer with its principal or home office in a state where it is authorized

Question 10

Define: Foreign Insurer

Answer 10

is an insurer that is authorized in one state, but its charter or principal office is in another State

Question 11

Define: Fraternal Benefit Society

Answer 11

are nonprofit benevolent organizations that provide insurance to their members

Question 12

Define: Industrial Insurer

Answer 12

a special branch of the industry primarily providing policies with small face amounts with weekly premiums. They are also referred to as home service or debit insurers

Question 13

Define: Insurance

Answer 13

The transfer of risk through the pooling or accumulation of funds

Question 14

Define: Insured

Answer 14

is the customer covered under the insurance policy

Question 15

Define: Insurer

Answer 15

is the insurance company

Question 16

What is Lloyds of London?

Answer 16

is NOT an insurer but an association or group of individuals or companies that underwrite unusual insurance

Question 17

Define: Multi-line Insurer

Answer 17

is an insurance company or independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life and health insurance needs

Question 18

Define: Mutual Insurance Company

Answer 18

are insurance companies characterized by having no capital stock; it is owned by their policy owners and usually issue participating insurance

Question 19

Define: Non-admitted Insurer

Answer 19

unauthorized insurer is an insurer who has not received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state

Question 20

Define: Non-participating plan

Answer 20

is insurance under which the insured is not entitled to share in the company’s divisible surplus

Question 21

Define: Participating Plan

Answer 21

is an insurance policy under which the policy owner shares in the company’s earnings through receipt of dividends

Question 22

Define: Private (Commercial) Insurer

Answer 22

are companies owned by private citizens or groups which offer one or more lines of insurance. Commercial insurers are NOT government owned

Question 23

Define: Reciprocal Insurer

Answer 23

is an unincorporated organization where all members insure one another

Question 24

Define: Reinsurance

Answer 24

is the acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage

Question 25

Define: Reinsurer

Answer 25

is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to

Question 26

Define: Risk Retention Group

Answer 26

is a group-owned liability insurer that assumes and spreads product liability and other forms of commercial liability risks among its members

Question 27

Define: Self-Insurers

Answer 27

establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company

Question 28

Define: Stock Insurance Company

Answer 28

is an insurance company owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary for the issuance of guaranteed, fixed premium, non-participating policies

Question 29

Define: Surplus Lines Insurance

Answer 29

is non-traditional insurance only available from a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers

Question 30

Define: Underwriting Department

Answer 30

is the department within an insurance company responsible for reviewing applications, approving, or declining applications, and assigning risk classifications