Insurance Fundamentals Flashcards
(22 cards)
National Association of Insurance Commissioners. (NAIC)
consists of ALL state and territorial insurance commissioners & regulators. Promotes uniformity among states. Provides resources for research and legislative & regulatory recommendations / interpretations for State insurance regulators. This entity has NO legal authority to enact or enforce laws.
Federal Insurance Office (FIO)
Established by Dodd-Frank Wall Street Reform + Consumer Protection Act. An office that monitors insurance industry, identifying issues and gaps in state regulation, as well as monitoring affordable access - traditionally for underserved communities/consumers. (Minorities, low/moderate income persons) FIO is NOT a regulator or supervisor, rather it provides education support networking and lobbying
Insurance is regulated mostly at the ________ level
State.
The State Legislative branch….
writes and passes insurance laws and statues that protect the insuring public.
The State Judicial branch…
is responsible for interpreting the laws and statutes made by the Legislative Branch.
The State Executive branch…
enforces existing statutes put into place.
The State’s Commissioner (Director, or Superintendent of Insurance) is appointed or elected for …
issuing rules and regulations which assist in enforcing statues. If elected, they’re elected by the State Governer
Federal Regulation of Insurance is…
limited. The Federal Governments role is to provide regulatory oversight impacting insurance practices. Congress created agencies to provide this service, as well as passes bills to create more congruency.
( PPACA, ADEA, PDA, Patriot Act, GINA, etc)
Stock Insurance Company
is owned by stockholders. Directors and officers are elected. They issue Non-Participating policies (meaning that the policyholder does not receive any dividends)
Mutual Insurance Company
is owned by Policyholders, also known as Members. The members elect a Board of Trustees/Directors, who put in place a management team which carries out the company mission. Issue Participating Policies, meaning if there is excess investment earnings, favorable mortality, or expense savings, then the dividends are given to policy holders as non-taxable.
Reciprocal Insurance Company
is owned by a group whose main activity is Risk Sharing. This is an UNINCORPORATED insurance company, formed by individuals, business corps, and firms that exchange insurance on one another. The exchange is affected through an Attorney-in-fact, who is not required to be licensed for insurance.
Lloyd’s of London
is not an insurance company but consists of a group of underwriters (called Syndicates) that each specialize in a particular type of risk.
Risk Retention Groups
are group-owned insurers that primarily assume and spread the liability risks of it’s members. Licensed in at least one state, but can insure in others. Group must be comprised of large number in a homogenous unit. Membership is limited to risks of similar liability exposure (i.e. amusement parks, go-cart tracks, water slides) and have sufficient assets to meet loss obligation
Reinsurance Companies issue 2 types of agreements
Treaty and Facultative
Facultative Reinsurance Agreements are…
what allows the company to reject coverage for individual risks, or price them higher in accordance to their nature.
Treaty Reinsurance Agreements are…
automatically accepting of all risks, as presented by ceding insurer.
The Financial Rating Services are…
Independent service providers who assess the stability of an insurance company through evaluating and rating the insurers ability to pay claims, as well as their financial health.
Financial Rating Services benefit…
The producer. It is the producers responsibility to place business with sound insurers, and using their rating system is best practice.
Surplus Lines Insurance…
finds insurance policies when it cannot be found through regular admitted insurers. They cannot be utilized simply to obtain a lower premium on policy, they are reserved for those who could not obtain insurance otherwise.
Law of Agency defines….
the relationship between an Insurer (Principal) and a producer operating as it’s agent. Law of agency covers powers and authorities given to agents in order to represent their Principal Insurer.
Express, Implied, Apparent
types of authority under Law of Agency.
Express is written in the contract;
Implied is not expressed, but is necessary to carry out the duties and expressed authorities;
Apparent is authority which is given per the conduct of the Agent, giving the general expression that the Agent is permitted to act on behalf of Principal Insurer (i.e. using company letterhead and rate books)
Fair Credit Reporting Act
protects consumer privacy and protects public from overly intrusive data collection practices. Ensures that the data collected is accurate, confidential, relevant, and will be used for a specific legal purpose
