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Definitions

Macy Fenderson English 110 cards

Cards in this deck (110)

  1. 1InsuranceTransfer of risk from a person or a business to an insurer
  2. 2RiskUncertainty, possibility of loss
  3. 3What are the two types of risk?Speculative and Pure
  4. 4Speculative RiskChance of loss or gain; not insurable (example: gambling or investments)
  5. 5Pure RiskChance of loss only; insurance companies will insure (example: car accident)
  6. 6ExposurePotential for accidents and other losses (example: the more a person drives, the more exposure they have to accidents AKA higher exposure means higher premium)
  7. 7PerilThe cause of loss (example: house burns down, peril is the fire)
  8. 8Losscan be defined as (1) The unintended, unforeseen damage to property, (2) injury, or (3) amount paid
  9. 9What are the two different types of losses?Direct and Indirect
  10. 10Direct LossA physical loss. Loss to property with no intervening cause
  11. 11Indirect LossConsequence of physical loss. (Example: loss of rental income due to a house fire, which causes a loss of profits for the landlord. The indirect loss is always the outcome of the direct loss.)
  12. 12HazardAnything that increases the chance a loss will occur
  13. 13What are the 3 different types of hazards?Physical, Moral, Morale
  14. 14Physical HazardThe hazard can be seen (example: wet floor sign)
  15. 15Moral HazardSomeone who increases their exposure to risk. Dishonesty is a moral hazard. Someone who has been given the idea causing a loss is acceptable is dishonest. (Example: someone who fakes losses)
  16. 16Morale HazardA manner of carelessness, a change in behavior (example: the insured leaving their car unlocked and running while quickly going inside a store)
  17. 17What is the acronym called that is used for handling risks?STARR (Sharing, Transfer, Avoidance, Retention, Reduction)
  18. 18Risk SharingTwo or more individuals or businesses agree to pay a portion of any loss incurred by any member of the group. (Example: Stockholders in a corporation share the risk)
  19. 19Risk TransferRisk transfer is what happens with insurance. (Example: The insurance company agrees to pay if an insured customer has a loss and the customer no longer bears the risk. The customer pays a premium that is much smaller in contrast to the large and uncertain loss)
  20. 20Risk AvoidanceRisk avoidance means eliminating a particular risk by not engaging in a certain activity. (Example: not driving a vehicle to avoid automobile risks)
  21. 21Risk RetentionRisk retentions means the individual or business will pay for the loss if it occurs or a deductible. (Example: If you don’t have car insurance to pay for the damages you cause to another person in an accident, you have retained that risk.)
  22. 22Risk ReductionRisk reduction refers to lessening the chance that a loss will occur or the extent of a loss. (Example: sprinkler systems)
  23. 23Insurance ContractA policy held between two members, the insurer and the insured. It is an agreement between the customer and the insurance company.
  24. 24The Law of Large NumbersThe larger the group, the more accurately losses can be predicted.
  25. 25What is the acronym for pure insurable risk characteristics?CANHAM, this is used so measure risk insurability. (Calculable, Affordable, Non-Catastrophic, Homogeneous, Accidental, Measurable
  26. 26ActuaryA person who computes premium rates according to probabilities based on statistical records.
  27. 27Calculable (CANHAM)Premiums must be calculable based upon prior loss statistics for that particular risk in order to predict future losses
  28. 28Affordable (CANHAM)The premium for transferring the risk should be affordable for the average consumer
  29. 29Non-Catastrophic (CANHAM)The risk must be non-catastrophic for the insurance company. National or area disasters have coverage limitations in insurance policies. The peril of war is excluded in most policies
  30. 30Homogeneous (CANHAM)The risk must be similar in nature so the same factors affect the chance of the loss. (Example: if it were predicted a wooden house would suffer a forest fire, you wouldn’t include brick houses in the probability)
  31. 31Accidental (CANHAM)The loss must have been caused due to chance (accident)
  32. 32Measurable (CANHAM)A definite (time and place) and measurable loss means that proof of loss must be established with numbers and dollar amounts, not just casual references
  33. 33Adverse Selection-Risks that have a greater-than-average chance of loss
    -Not wanted by insurers
    -Tendency for high-risk individuals to get and keep insurance
    -Why insurers go through the underwriting process
    -High risk = higher rate to insure or refusal
  34. 34ReinsuranceAn insurance company's insurance company. Helps insurers spread their risk
  35. 35What is the difference between a ceding insurer and a reinsurer?The company reducing its risk is called the ceding insurer. The company assuming the risk is caller the reinsurer
  36. 36Facultative ReinsuranceReinsurer considers each risk before allowing the transfer from the ceding company
  37. 37Treaty ReinsuranceThe reinsurer accepts all risks of a certain type from the ceding company
  38. 38Stock Insurer-Owned by stockholders
    -Dividend is not guaranteed
    -Dividend is paid to stockholder
    -Dividend is taxable to stockholder
    -Issue non-participating policies
  39. 39DividendA distribution to a policyholder of a portion of the premium not needed by the company to pay claims or to meet expenses
  40. 40Mutual Insurer-Owned by policyholders (customers)
    -Dividend is not guaranteed
    -Dividend is paid to policy holder
    -Dividend is not taxable; considered a refund of premium
    -Issue participating policies
  41. 41Fraternal Benefit SocietiesMust be a member to receive insurance or other benefits. These organizations are typically based on common religion or ethic group. Fraternal policies are called certificates, and members who have insurance are called certificate holders
  42. 42Open ContractsCertificate holders may receive additional charges if premiums are insufficient to cover claims during a given period
  43. 43Reciprocal Insurers-Unincorporated
    -Members are assessed if a loss occurs to any member of the group
    -Managed by an attorney-in-fact
  44. 44Lloyd's AssociationsInsurance provided by individual underwriters, not companies. They insure unusual risks. (Examples: celebrity’s hair, athlete’s arm, hole-in-one contest)
  45. 45Risk Retention GroupsLiability insurance company created for policyholders from the same industry. (Example: a car dealers’ risk retention group in which only car dealers can be policyholders)
  46. 46Risk Purchasing GroupsA group of businesses from the same industry that join together to buy liability insurance from an insurance company
  47. 47Self-InsurersA business that pays its own claims. Reserves funds to cover losses. Retains risk rather than transfers
  48. 48Private Vs. Government InsurersThe federal government provides insurance in the instance of war, floods, unemployment, workers’ comp, etc.
  49. 49Domestic Insurerthe state where a company is incorporated. An insurer’s home state is also called its state of domicile
  50. 50Foreign Insurercompany is incorporated in another state or U.S. territory
  51. 51Alien Insurercompany is incorporated in another country
  52. 52Certificate of Authoritystate license for an insurance company
  53. 53Authorized Vs. Unauthorized InsurersAuthorized Insurer - admitted insurance company. Certified. Able to sell, place, and service most insurance contracts.
    Unauthorized Insurer - non admitted insurance company. Not certified. Sell surplus lines of insurance products
  54. 54Surplus Line Insurers-Insurance sold by unauthorized insurers, if found on state approved list
    -Only sold to certain high-risk insureds (Example: casinos, mines, etc.)
    -Cannot be sold solely for a cheaper rate than admitted insurers
  55. 55Financial Strength RatingA report cart of the company. There are several rating agencies that evaluate factors such as insurer’s loss experience, reserves, investment performance, management, etc.
  56. 56What are the four different types of agents?-Independent
    -Exclusive or Captive
    -General agents or managing general agents
    -Direct-writing companies
  57. 57Independent insurance agentsindividuals that sell the insurance products of several companies and are independent contractors, not employees of the insurer(s)
  58. 58Captive (exclusive) agentsindividuals that represent only one company. Captive agents are independent contractors, not employees of the insurer. The insurance company owns the renewals of the policies sold on their behalf
  59. 59General agents (GAs) or managing general agents (MGAs)individuals that hire, train, and supervise other agents within a specific geographical area. GAs and MGAs earn overriding commissions (overrides) on the business produced by the agents they manage
  60. 60Direct-writing companiescompanies whose products are sold by employees, not independent contractors. This type of producer may be compensated by a salary, commission, or both. The insurance company owns the renewals of the policies sold on their behalf
  61. 61Direct Response-No agent/producer involved
    -Direct mail, tv ads, magazine ads, internet ads, radio ads, etc.
  62. 62AgencyThe insurance agent acts on behalf of the principal (the insurance company)
  63. 63AgentA person authorized to act on behalf of a corporation or insurance company
  64. 64PrincipalAka the insurance company. In insurance, the insurer is the principal and the sales representative or producer is the agent
  65. 65What are the three different types of agent/producer authority?Express, Implied, Apparent
  66. 66Express authorityauthorities written in the agent's contract
  67. 67Implied authorityauthorities not written in agent contract but tasks agent must perform; implied that agent has this authority
  68. 68Apparent authoritytasks the agent does that a reasonable person would assume as authority, based on the agent's actions and statements
  69. 69Fiduicary-responsibility to promptly send premiums to the insurer
    -a person in position of financial trust
    -has knowledge of products
    -complies with laws and regulations
    -does not commingle funds
  70. 70What is the acronym used to define the elements of a legal contract? How many elements? What are they?5. CLOAC. Consideration, Legal Purpose, Offer, Acceptance, Competent Parties
  71. 71Consideration (CLOAC)Money. An exchange of value made on application
  72. 72Legal Purpose (CLOAC)Risk transfer doesn't violate the law
  73. 73Offer and Acceptance (CLOAC)Offer made by insured, submits application for first month premium, insure accepts or denies the risk.
  74. 74CounterofferMade by insurer. Agrees to issue policy but with high premium or restrictions. Insurer either accepts or declines.
  75. 75Component Parties (CLOAC)-sober
    -18 or older
    -sane
  76. 76Adhesion-glue, policy written by the insurance company
    -insured has no input
    -if not clear, court takes the side of insured
  77. 77Aletory-Unequal value
    -Pay small premium and have a large claim, or pay premiums for many years without a claim
  78. 78Utmost Good Faith and Reasonable ExpectationThe insured and the insurance company have the right to expect honesty from each other
  79. 79Unilateral-Insured may cancel the contract at anytime
    -Insurer must pay covered losses
  80. 80Personal Contracts-Insurance policies
    -Contract between the insurance company and the insured
    -Cannot be changed to someone else
  81. 81ConditionalInsured must pay the premium for coverage and file a claim if a loss occurs
  82. 82Indemnity-Indemnification means paying for the loss, expecting no gain.
    -No more! No less!
  83. 83RepresentationsA representation is believed to be true; statements on applications
  84. 84MisrepresentationsMisrepresentations means information has been provided that is not true, however cannot affect the insurance company’s decision
  85. 85Material Misrepresentationsinformation given that is not true and DOES affect the insurer’s decision
  86. 86Warranties-Form of a promise; Made by the insurance company
    -Breach of warranty may result in a voided claim
  87. 87Concealement-The failure to disclose known facts;Hiding information
    -If intentional and information is material, coverage can be voided
    -If NOT intentional, coverage can NOT be voided
  88. 88Fraudintentional act to cheat another
  89. 89Waivervoluntarily giving up a right
  90. 90Estoppelonce a waiver has been created, it cannot be changed
  91. 91Casualty Insurance-takes care of "the other guy"
    -never covers the insured (me)
    -liability insurance
  92. 92Property insurance-Real property = buildings
    -Stuff/Personal property = television
    -Cover property insurance
    -First party losses
  93. 93What are the different party losses?First person - me (the insured)
    Second person - my insurer
    Third person - the "other guy"
  94. 94What is the acronym used to describe the seven parts of the property and casualty policy structure?DICEE. (Declarations, Insuring agreements, Conditions, Endorsements, Exclusions)
  95. 95Declarationswho, what, when, where, and how much?
  96. 96Insuring agreementspromise to pay and perils covered
  97. 97Conditionsrules for the policy
  98. 98Endorsementschanges to the original policy
  99. 99Exclusionsitems not covered
  100. 100Additional/supplementary coveragePayment for additional expenses not normally covered
  101. 101Insuredsby definition
  102. 102Named insuredlisted on the declarations
  103. 103First-named insuredslisted first on the declarations
  104. 104Additional insuredsAdded by endorsements. Not listed by name.
  105. 105Policy Periodwhen the policy begins and ends aka time frame
  106. 106Policy Territorywhere a loss must occur, area of coverage typically within the US
  107. 107What is the beginning date of a policy referred to as?Inception
  108. 108What is the end date of a policy referred to as?Expiration
  109. 109CancellationWhen the insured stops coverage before the expiration date
  110. 110Unearned premiumpremiums paid months in advance that are returned when an insured cancels policy before expiration date

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Description
Introduction to Insurance
Created by
Macy Fenderson
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