Aflac 1

What Criteria do you look at while evaluating risks

Age, gender, occupation, health, money, location

Indemnity

Also known as a reimbursement, states that in a event of loss, a beneficiary will collect those losses.

morale hazards

Arise from a state of mind that's indifferent from loss like careless

Implied authority

Assumed things agents need to do, not stated in contract but common sense in order to transact buisness

What type of insurance is predetermined blanket agreement

Automatic (treaty) insurance

What makes competent parties

Both are understanding what's happening, not high or drunk

Legally binding contact must have 4 things

Both parties to consider (CONSIDERATION) the offer, to AGREE to the offer, both are COMPETENT and understanding what's happening, and there's a LEGAL PURPOSE

How can insurance companies avoid adverse selection

By refusing or restricting coverage for bad risks or charging more money on their policies

Risk

Chance that a loss will occur

Hazards

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

Binding force in any contract is what?

Consideration.

Which of the following is not an essential element in an insurance contract

Counteroffer

Not all risks are insurable. Certain characteristics must be present for a particular risk to be considered an insurable

Due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected on large exposure

What are two types of reinsurance agreements

Facultative and automatic

social insurance programs

Federal and state governments provide insurance in the areas where private insurance is not available

As a number of purple in a risk pool increases...

Future losses become more predictable

Fraud

INTENTIONALLY misrepresentation of an existing, important fact

A life insurance policy has legal purpose if what two things exist

Insurable Interest consent

What do individuals use to transfer their risk of loss to a larger group?

Insurance

Reciprocals

Insurance companies made up of subscribers who are known as reciprocal insurance company or exchange

Concealment

Intentional failure to disclose material underwriting facts that should have been disclosed; grounds for policy rescission. Hiding something sneaky

reciprocal

Interchange of reciprocal agreements of indemnity

Insurer's Consideration

Is the promise to pay for losses

homogeneous

Large number of units having the same exposure to loss

domicille

Location where the insurer is located, not necessarily where the insurer conducts business

Who loves Ali

MIRANDA yummy yummy Ali

Unilateral

One side is making a promise

Llyod's Associations

Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk. NOT AN INSURANCE COMPANY

Mutual Companies

Owned by the policy owners and issue participating policies.nontaxable

Insured's Consideration

Premium and statement in an application

Estoppel

Prevents the denial of a fact, if the fact was admitted to be true previously.

Whats the difference between private insurance and government insurance?

Private insurance is funded by premiums, Government insurance is funded by taxes.

Hazards Increase what?

Probability of loss

Insurance means to...

Provide a means for transfer loss

In a case of loss, the indemnity provision in insurance policies

Restores an insured person to the same financial state as before the loss

Events in which a person has both the chance of winning or losing are classified as

Speculative risk

Express Authority

Stated in agents contract

Apparent Authority

The assumption an agent has authority to work or sell for a certain buisness. For example if you see someone on the streets downtown in slutty outfits you would assume they are a prostitute. If I see you holding Bank of America cards I'll assume you work on behalf of them.

Insurance agents represent who?

The insurer, also known as the principal

Ceding Insurer

The originating company that procures insurance on itself from another insurer

moral hazards

They lie on an application, fraudulent claims

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

Due to chance

a loss that is outside the insured's control

Physical Hazard

a physical condition that increases the frequency or severity of loss

Contract

agreement between two or more parties that can be enforced by law

perils

causes of loss insured against in an insurance policy

Non participating policies

does not pay dividend to the policy owner however taxable dividends are paid to stockholders

What are insurable risks?

due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected and large exposure.

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

indemnity

Contract of Adhesion

the insured must accept the entire contract with all of its terms and conditions

Facultative Reinsurance

when reinsurance is purchased on a specific policy

Reinsurance

A contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities.

Risk Retention Group

A liability insurance company owned by its members, which are exposed to similar liability risks by virtue of being in the same business or industry.

Definite and measurable

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.

Sharing

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

Personal contract

An agreement between an insurance company and an individual that states that insurance policies cover the individual's insurable interest.

In insurance, an offer is usually made when

An applicant submits an application to the insurer

Foreign Insurer

An insurance company that is incorporated in another state.

Alien Insurer

An insurance company that is incorporated outside the United States.

Domestic Insurer

An insurer doing business in the jurisdiction in which it is incorporated.

Stock Insurer

An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders.

What are the methods to handling risks

Avoidance, Retention, Sharing, Reduction, Transfer

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is what?

Avoidance- If you avoid something you're not exposing yourself too it.

What is the most common method of transferring risk

Insurance, because it takes the financial burden away

statistically predictable

Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.

Insurance is a contact by which one seeks to protect another from?

Loss

Fraternal Benefit Societies

Must be nonprofit, have a lodge system, and offer insurance to its members only

Upmost good faith

No fraud, concealment, nothing. The insurer must clearly describe everything in the policy and not mislead

Adhesion

Only one party (insurer) prepares a contact and the other party accepts it as is.

The cause of a loss is what?

Peril

Retention

Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

Which type of insurance is based on mutual agreements among subscribers

Reciprocal insurance

Loss

The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.

Randomly selected and large loss exposure

There must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location.

For insurance purposes, representations are what on insurance applications

They are answers that are best true answered. Because representations are true

When reinsurers use facultative reinsurance they do what to each application

They underwrite each application separately

What's the purpose of reinsurance

To protect insurers against catastrophic losses

What are the three purposes of Retention?

To reduce expenses and improve cash flow, more control of claim reserving, fund for losses that can not be returned.

What is the most effective way to handle a risk

To transfer it so that the loss is borne to another party

Representations are statements believed to be true or false

True

Aleatory Contract

Unequal exchanges because payment of benefits is contingent upon the occurrence of an uncertain loss.

The insurer must be able to rely on the statements in the application and the insured must be able to rely on the insurer to pay valid claims. I'm the forming of an insurance contract this is what?

Upmost good faith. If you were the enrolling, you would rely on your agents statements to be true. That's upmost good faith.

A contract without a legal purpose is considered a what

Void, and can not be enforced by any other party

Reinsurance Treaty

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.

How does acceptance take place

When an insurers underwrite approves the application and issues a policy

How are dividends created

When the premiums and earnings combined exceed the actual cost of coverage creating a surplus

Avoidance

eliminating exposure to a loss

Admitted/authorized users

insurance company that has a certificate of authentication to show you can do business in that state

reciprocol

insurance resulting from an interchange of reciprocal agreements

Adverse Selection

insuring of risks that are more prone to losses than the average risk

Adverse selection

insuring of risks that are more prone to losses than the average risk...Insurance companies avoid these

captive insurer

organized and owned by a cooperation or firm to serve the insurance needs at lower rates

private owernships

ownership, authority to transact business, location, marketing, and rating (financial)

Unilateral Contract

promise in exchange for an act

A reciprocal insurance exchange is what type of agreement

risk sharing agreement

Reduction

taking action to prevent risks. Ect installing smoke detectors, checkups, lifestyle changes

Law of Large Numbers

the larger the number of individuals that are randomly drawn from a population, the more representative the resulting group will be of the entire population

Waiver

the voluntary relinquishment of a known legal right

What does cede mean

to give up

aleatory

unequal