General Insurance Health

Question 1

Agent/Producer

Answer 1

a legal representative of an insurance company; the classification of producer
usually includes agents and brokers; agents are the agents of the insurer

Question 2

Applicant or proposed insured

Answer 2

a person applying for insurance

Question 3

Broker

Answer 3

— an insurance producer not appointed by an insurer and is deemed to represent the client

Question 4

Insurance policy

Answer 4

a contract between a policyowner (and/or insured) and an insurance company
which agrees to pay the insured or the beneficiary for loss caused by specific events

Question 5

Insured

Answer 5

the person covered by the insurance policy. This person may or may not be the
policyowner

Question 6

Insurer (principal

Answer 6

the company who issues an insurance policy

Question 7

Policyowner

Answer 7

the person entitled to exercise the rights and privileges in the policy

Question 8

Premium

Answer 8

the money paid to the insurance company for the insurance policy

Question 9

Reciprocity/Reciprocal

Answer 9

— a mutual interchange of rights and privileges

Question 10

Insurance

Answer 10

a contract in which one party (the insurance company) agrees to
indemnify (make whole) the insured party against loss, damage or liability arising
from an unknown event.

Question 11

insurance transaction

Answer 11

Solicitation;
Negotiations;
Sale (effectuation of a contract of insurance); and
Advising an individual concerning coverage or claims.

Question 12

Risk

Answer 12

is the uncertainty or chance of a loss occurring. The two types of risks are
pure and speculative, only one of which is insurable

Question 13

Reinsurance

Answer 13

a contract under which one insurance company (the reinsurer)

indemnifies another insurance company for part or all of its liabilities

Question 14

ceding insurer (reinsurance)

Answer 14

The originating

company that procures insurance on itself from another insurer

Question 15

assuming insurer (reinsurance)

Answer 15

The insurance company that takes on the risk

Question 16

reinsurance treaty

Answer 16

When an insurer has an automatic reinsurance agreement between
itself and the reinsurer in which the reinsurer is bound to accept all risks ceded to
it,

Question 17

Stock companies

Answer 17

owned by the stockholders who provide the capital
necessary to establish and operate the insurance company and who share in any
profits or losses. Officers are elected by the stockholders and manage stock
insurance companies. Traditionally, stock companies issue nonparticipating
policies, in which policy owners do not share in profits or losses.

Question 18

Mutual companies

Answer 18

are owned by the policyowners and issue participating policies.
With participating policies, policyowners are entitled to dividends, which, in the
case of mutual companies, are a return of excess premiums and are, therefore,
nontaxable. Dividends are generated when the premiums and the earnings
combined exceed the actual costs of providing coverage, creating a surplus.
Dividends are not guaranteed

Question 19

Fraternal Benefit Societies

Answer 19

an organization formed to provide insurance benefits
for members of an affiliated lodge, religious organization, or fraternal organization
with a representative form of government. Fraternals sell only to their members
and are considered charitable institutions, and not insurers. They are not subject
to all of the regulations that apply to the insurers that offer coverage to the public
at large.

Question 20

Reciprocals

Answer 20

insurance resulting from an interchange of reciprocal agreements
of indemnity among persons known as subscribers, collectively known as a
Reciprocal Insurance Company or Exchange

Question 21

Risk Retention Groups

Answer 21

a liability insurance company owned by its
members. The members are exposed to similar liability risks by virtue of being in
the same business or industry. The purpose of a risk retention group is to assume
and spread all or part of the liability of its group members.

Question 22

Lloyd’s Associations

Answer 22

Lloyd’s is not an insurance company. Lloyd’s provides support facilities for
underwriters or groups of individuals that accept insurance risk.
Lloyd’s associations are a group of individuals who operate an insurance
mechanism using the same principles of individual liability of insurers that Lloyd’s
of London uses, in that each individual underwriter assumes a part of each risk.
Each individual promises to pay a specified amount in the event that the
contingency insured against occurs. Members are liable only for their portion of
the risk and are not bound to assume any portion of a defaulting member

Question 23

Risk Retention Group

Answer 23

is a liability insurance company owned by its members.

Question 24

A large number of units having the same or similar exposure to loss is known as

Answer 24

homogeneous

Question 25

conditions or situations that increase the probability of an insured loss occurring.

Answer 25

Hazards

Question 26

physical moral morale are types of ___________

Answer 26

Hazards

Question 27

individual characteristics that increase the chances of the cause of loss. exist because of a physical condition, past medical history, or a condition at birth, such as blindness.

Answer 27

Physical | hazards

Question 28

tendencies towards increased risk involve evaluating the character and reputation of the proposed insured. hazards refer to those applicants who may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer

Answer 28

Moral | hazards

Question 29

arise from a state of mind that causes indifference to loss, such as carelessness

Answer 29

Morale | hazards

Question 30

the causes of loss insured against in an insurance policy

Answer 30

Perils

Question 31

defined as the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril

Answer 31

Loss

Question 32

__________means eliminating exposure to a loss.

Answer 32

avoidance

Question 33

________ is the planned assumption of risk by an insured through the use o fdeductibles, co-payments, or self-insurance.

Answer 33

Risk Retention

Question 34

is a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group

Answer 34

Sharing

Question 35

____________ would include actions such as installing smoke detectors in our homes, having an annual physical to detect health problems early, or perhaps making a change in our lifestyles.

Answer 35

Reduction

Question 36

Risk that are Due to chance, Definite and measurable, Statistically predictable, Not catastrophic, Randomly selected and large loss exposure are considered to be_________-

Answer 36

Insurable

Question 37

A loss that is outside the insured’s control is a risk that is _______________

Answer 37

Due to chance

Question 38

A loss that is specific as to the cause, time, place and amount. An insurer must be able to determine how much the benefit will be and when it becomes payable. Is called

Answer 38

Defi nite and measurable

Question 39

Insurers need to be reasonably certain their losses will not exceed specific limits. This is covered in the concept of a loss being ________________

Answer 39

Not catastrophic

Question 40

There must be a suffi ciently largepool of the insured that represents a random selection of risks in terms of age,gender, occupation, health and economic status, and geographic location

Answer 40

Randomly selected and large loss exposure

Question 41

owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses.

Answer 41

Stock companies

Question 42

Officers are elected by the stockholders and manage stock insurance companies.

Answer 42

Stock companies

Question 43

__________issue nonparticipating policies, in which policy owners do not share in profits or losses.

Answer 43

Stock companies

Question 44

____________ are owned by the policyowners and issue | participating policies

Answer 44

Mutual companies

Question 45

a _______________ policyowners are entitled to dividends

Answer 45

Mutual companies

Question 46

in the case of mutual companies, are a return of excess premiums and are, therefore, nontaxable .

Answer 46

Dividends

Question 47

a ___________________ is an organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.

Answer 47

fraternal benefit society

Question 48

__________ sell only to their members and are considered charitable institutions, and not insurers. They are not subject to all of the regulations that apply to the insurers that offer coverage to the public at large.

Answer 48

Fraternals

Question 49

A ____________ is insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers,

Answer 49

reciprocal

Question 50

______________ are administered through an attorney-in-fact common to all persons. Subscribers agree to become liable for their share of losses and expenses incurred among all subscribers, and they authorize the attorney-in-fact to manage and operate the exchange.

Answer 50

Reciprocals

Question 51

A _______________ is a liability insurance company owned by its members.

Answer 51

risk retention group

Question 52

The purpose of a_________ is to assume and spread all or part of the liability of its group members a ____________ may reinsure another _________ liability as long as the members of the second are engaged in the same or similar business or industry.

Answer 52

risk retention group

Question 53

_________ is not an insurance company. ________ provides support facilities for underwriters or groups of individuals that accept insurance risk.

Answer 53

Lloyd's

Question 54

_____________ are a group of individuals who operate an insurance mechanism using the same principles of individual liability of insurers that ________ uses, in that each individual underwriter assumes a part of each risk

Answer 54

Lloyd's associations

Question 55

Each individual promises to pay a specified amount in the event that the contingency insured against occurs. Members are liable only for their portion of the risk and are not bound to assume any portion of a defaulting member. Refers to a ___________

Answer 55

Lloyd's associations

Question 56

___________ is a type of coverage that is not readily available on admitted market. Such coverages are marketed through non-admitted insurers who specialize in offering insurance to the high-risk market on an unregulated basis under each state's _______ laws.

Answer 56

Surplus lines

Question 57

While _________ insurers are not admitted, most states require that they be on that state's "approved" list

Answer 57

surplus lines

Question 58

Before insurers may transact business in a specific state, they must apply for and be granted a license or _______________ from the state department of insurance and meet any financial (capital and surplus) requirements set by the state.

Answer 58

Certificate of Authority

Question 59

Insurers who meet the state's financial requirements and are approved to transact business in the state are considered ______________ into the state as a legal insurer.

Answer 59

authorized or admitted

Question 60

Those insurers who have not been approved to do business in the state are considered _________

Answer 60

unauthorized or nonadmitted

Question 61

Most stateshave laws that prohibit unauthorized insurers from conducting business in the state, except through ______ brokers.

Answer 61

licensed excess and surplus lines

Question 62

Insurers must obtain a ___________ prior totransacting business in this state

Answer 62

Certificate of Authority

Question 63

Insurance companies are classified according to the ____________. Regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state

Answer 63

location of incorporation | domicile

Question 64

A ____________ is an insurance company that is incorporated in this state

Answer 64

domestic insurer

Question 65

A __________ is an insurance company that is incorporated in another state orterritorial possession (such as Puerto Rico, Guam or American Samoa)

Answer 65

foreign insurer

Question 66

An _________ is an insurance company that is incorporated outside the UnitedStates

Answer 66

alien insurer

Question 67

The financial strength of an insurance company is based on _____, __________, __________ (amount of money kept in a separate account to cover debts to policyholders), and _________, to name a few.

Answer 67

prior claims experience investment earnings level of reserves management

Question 68

Guides to insurance companies 'financial integrity are published regularly by the following various independent rating services

Answer 68

``` AM Best Fitch Standard and Poor's Moody's Weiss ```

Question 69

1 independent agent represents several companies Nonexclusive Commissions on personal sales Business renewal with any company

Answer 69

Independent AgencySystem/ | American Agency System

Question 70

``` 1 agent represents 1 company Exclusive Commissions on personal sales Renewals can only be placed with the appointing insurer ```

Answer 70

Exclusive AgencySystem/ | Captive Agents

Question 71

General agent-entrepreneur represents 1 company Exclusive Compensation and commissions Appoints subagents

Answer 71

General AgencySystem

Question 72

No agents Company advertises directly to consumers (through mail, Internet, television, other mass marketing) Consumers apply directly to the company

Answer 72

Direct Response Marketing System

Question 73

Branch manager (supervises agents) Salaried Agents can be insurer’s employees or independent contractors

Answer 73

Managerial System