NYS Life and Health Pre License: XCEL ch 1

Reinsurers

"Insure insurers"- is an arrangement by which an insurance company transfers a portion of an assumed risk to another insurer. Can limit the loss any one insurer would face should a large claim become payable. Could helps a company to meet specific objectives such as favorable underwriting or mortality results.

social insurance programs

1) write insurance to cover perils that are not insurable by commercial insurance (War, flood, nuclear reaction) or 2) write insurance on risks that are insurable and this compete with the commercial marketplace ( Social insurance Singh as workers compensation)

Insurer

A person or company that underwrites an insurance risk; the party in an insurance contract undertaking to pay compensation.

Stock Companies - Nonparticipating

A private organization, organized and incorporated under state laws for the purpose of making a profit for its stockholders It is structured the same as any corporation Stockholders may or may not be policyholders. When declared, stock dividends are paid to stockholders. In a stock company, the directors and officers are responsible to the stockholders A stock company is referred to as a nonparticipating company because policyholders do not participate in dividends resulting from stock ownership.

1994-United States Code (USC) Section 1033 and 1034

According to 18 USC 1033 and 1034 it is criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate in any capacity in the business of insurance with first obtaining a letter of consents to engage in the business of insurance from the regulating insurance department of the individuals state residence.

State Guaranty Association

All states have establish guaranty funds or guaranty associations to support insurers and protect consumers if an insurer becomes INSOLVENT. The state association will step in and cover the consumers unpaid claims to specific amount if the insurer is unable to.

Claim Settlement Associations

All states require prompt, fair, and equitable claim settlement practices

National Association of Insurance Commissioners

An association of insurance commissioners from the fifty U.S. states, the District of Columbia, and the five U.S. territories and possessions, whose purpose is to coordinate insurance regulation activities among the various state insurance departments. Four board objectives: 1. To encourage uniformity among the state insurance laws and regulations 2. To assist in the administration of those laws and regulations by promoting efficiency 3. To protect the interest of the policy owners and consumers 4. To preserve state regulation of the insurance business

Authorized Insurer

An insurer that is admitted or authorized to transact insurance burnsides in a particular state

Admitted Insurer

An insurer to which a state insurance department has granted a license to do business within that state.

Actuary

An officer, as of an insurance company, who calculates policy rates, reserves and dividends and makes other applicable statistical studies and reports. Concerned about the cost of insurance as a whole or for specific class of risk.

service representative

Are employees of an insurer, not deal with insurance sales do not need to be licensed

Reciprocal Insurers

Are organized on the basis of ownerships by their policyholders. The policyholder themselves who insure the other policyholders risks. Each policy holder assumes a share of the risk brought to the company by others. An attorney-in-fact reciprocal insurers

insurance

As the transfer of risk from one party to another through a legal contract

Strong Assessment Mutual/Insurers

Assessment mutual companies are classified by the way in which they charge premiums

Career Agency System

Branches of major stock and mutual insurance companies that are contracted to represent an insurer in a specific area. Recruited, trained and surprised but manager-Employee of the company or General agent(GA)

Actuarial Department

Calculates policy rates, reserves, and dividend and make other applicable statistical studies and reports focusing on morbidity and mortality tables.

Advertising Code

Certain words and phrases that are considered miss leading and, as such, can not be used in advertising of any kind.Also required under this code is a full disclosure of policy renewal, cancellation, and termination provisions

Multi-line insurers

Companies that sell more than one life of insurance

ceding company

Company transferring the risk during the process of reinsuring

Independent Agency System (American Agency System)

Creation of the property and casualty industry, doesn't tie a sales staff or agency to any one particular insurance company. Can represent any number of insurance companies through contractual agreements.

Documentation

Documents each clients meeting and transactions. The agent uses fact-finding forms and obtains the clients written agreement for the needs determined, the products recommended, and the decisions made. Some documents and documentation is required by state law.

Full and accurate disclosure

Don't hide things from client ever

Fraternal Benefit Societies

Fraternal Benefit Societies, or Fraternal Associations, are non-profit, mutual aid organizations that engage primarily in charitable or benevolent activities. They offer their members insurance against death, disease, and disability.

unfair trade practice acts

Gives the head of each state insurance department power to investigate insurance companies and producers, to issue cease and desist orders, I am to impose penalties. The act also gives officers the authority to seek a court injunction to restrain insurance from using any methods believe to be unfair. The contacts of unfair trade practice is misrepresentation and false advertising, coercion and intimidation, unfair discrimination, and inequitable administration of claim settlements

rating services

Help publicize the financial health of insurers. The primary purpose of the reading service company such as a.M best, Fitch rating , standard and poors , and Moody's is determined the rated companies the insurer financial strength

1958 Intervention by the Federal Trade Commission (FTC)

In an attempt by the FTC to regulate insurance advertising, the Supreme Court decided, due to the McCarran-Ferguson Act, that a federal agency such as the FTC had no ruling or authority over the states regarding insurance advertising regulation.

Benefits

In the form of services provided by the hospital and physicians participating in the plan.

Liquidity

Indicates a company's ability to make unpredictable payouts to policy owners. States require various minimum reserves and liquidy thresholds prior to issuing a certified of authority in verifying these thresholds Periodically through an examination of insurer financial records

Alien Insurer

Is an insurer authorized in any state with the US BUT it's principle office is located outside the US.

Foreign Insurer

Is authorized in one state but it's charter or principal offices is in another state. ( Authorized in PA but office in NY)

Self-insurers

Is not a method of transferring risk. It will establishes a self-funded plan to cover potential losses. i.e large companies for funding pension plans and some health insurance plans. Will looks for insurance company to provided insurance above a specified maximum loss level. They will bear the mount of loss below that maximum amount.

unauthorized (nonadmitted) insurance company

Is not permitted nor allowed to conduct insurance operations in a particular state. Some cases non-admitted insurer may still offer surplus lines insurance with a certificate of authority if no authorized insurer in the market is available or willing to take the risk.

divisible surplus

Is the amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, general business purposes.

Private Insurers

May be proprietary or cooperative (Profit-motivated stock company) Can offer individual, group, industrial, or blanket insurance policies.

Mutual Companies - Participating

Mutual insurance companies are also organized and incorporated under state laws, but they have no stockholders. Instead, the owners are the policyholders Anyone purchasing insurance from a mutual insurer is both a customer and an owner. He has the right to vote for members of the board of directors. By issuing participating policies that pay policy dividends, mutual insurers allow their policyowners to share in any company earnings. Referred to as participating companies because policyowners participate in dividends.

NAIFA and NAHU

National Association of insurance and financial advisors and National Association of health underwriters Members of these organizations are life and health agents dedicated to supporting the industry and advancing the quality of service provided by insurance professionals. These organizations created a code of ethics detailing the expectations of agents in their duties towards clients

Surplus Lines Insurance

Not the traditional insurance market. To Seek coverage through surplus lines broker for high, substandard, or unusual risks ( Hole-in-one insurance or nonappearance coverage) To qualify: effort has to be made to secure coverage in the authorized market. An individual may not attempt to secure coverage just because it may be less expensive.

HMO (Health Maintenance Organization)

Offers a wide range of services to members for a predetermined fee by a limited group of providers Are known for stressing preventive health care and early treatment programs.

2010-Patients Protection and Affordable Care Act (PPACA)

Often shortened to the affordable care act it represents one of the most significant regulatory overhauls and expansions of health insurance coverage in the United States history

Risk Retention Group or Risk Purchasing group

Only has to be licensed in one state but may insure members in any state

Pure Assessment Mutual Company

Operates on the basis of loss-sharing by group members. No premium is payable in advance. Instead, each member is assessed an individual portion of losses that actually occur.

Fixed periodic premium

Paid in advance of any treatment, subs are entitled to the services of specific physicians and hospital contracted to work with the HMO.

Adjuster

Person who engages in investigative work to obtain information for adjusting, settling or denying insurance claims. Will use claim forms, but depending on the claims, may also be involved with investigations into an insureds identity, habits, conduct, business, job, honesty, integrity or credibility.

Public Adjuster

Person who, for compensation, acts on behalf of or aid insured with settling an insurance claim.

Earned Surplus

Post tax earnings not paid in dividends

Domestic Insurer

Principal or home office in the state where it is authorized. (Other words if authorized in NY, they are in NY)

Private commercial insurance Companies

Private company's, Stock, mutual companies that can write life, health, property and casualty insurance

Mixed Plan

Rare cases stock insurance company issuing both participating and nonparticipating policies is referred as.

Producers

Refers the the full range of individuals who solicits insurance products to the Publix.

Financial Services Modernization Act 1999

Repealed the Glass Steagall Act, which barred common ownership of banks, insurance companies and securities firms and erected a regulatory wall between banks and non-financial companies.

Solicitors

Represent and solicit insurance on behalf of an agent

Agent

Represents the insurer who sponsors them.

Marketing or sales divisions

Responsible for increasing the number of prospective applicants, thereby increasing the number of insured, through varies advertising mediums.

claims department

Responsible for processing, investigation and paying claims for losses incurred by insureds.

Underwriting Department

Responsible for reviewing applications, conducting investigations to gain additional information about applicants, assigning risk classification, and approving or declining an application. Person who identifies, assesses, examines and classified the amount of risk represented by an applicant. And then at what cost if it were to be provided.

service providers

Sell medical and hospital care services to their subscribers, not insurance, in return for a premium payment.

Personal Producing General Agent (PPGA)

Sells insurances, although they may build a small five to assist them. They maintain their own offices and administrative staff. Agents hired by PPGA are considered employees and not the insurance company.

Federal and state government insurers

Social Insurance Programs, cover the elderly under catastrophic perils, catastrophic medical costs (Medicare) Examples: Old-Age, survivors and disability Insurance (OASDI) or also known as SS Social security hospital insurance (HI) Supplemental Medical Insurance (SMI) or know as Medicare Medicaid Serviceman groups life insurance (SGLI) Veterans Group Insurance (VGLI) National Flood Insurance Program and Federal Crop Insurance Corporation

1945 McCarran and Ferguson Act

States that while federal government has the authority to regulate the insurance industry, it would not exercise that right if the insurance industry was run effectively and adequately by the states

Stock Insurance Companies

Stock insurance companies issue none participating (NPP)insurance policie. NPP do not allow policyholders to participate in the company profits (Receive dividends) NPP do not allow policyholders to electe the company board of directors

1959 Intervention by the SEC

The Supreme Court decided that annuity and variable life insurers are to be regulated under the authority of both the Securities and Exchange Commission (SEC) and the states.

Reserves

The account measurements of an insurer future obligations to it's policyholders. They are classified as liabilities on the insurance companies accounting statements since they must settle at a future date.

Reinsurer

The company assuming the risk

2003- do not call implementation Act

The do not call registry allows consumers to include their phone numbers on the list to which telemarkers cannot make solicitation calls .calls made behalf of charities, political organizations, and surveys are exempt. insurance calls are not exempt from the no not call registry

Client service

The ethical agent knows that a sale does not mark the end of a relationship with a client, but rather the beginning. Routine follow-up calls are recommended to ensure the clients needs always are covered, and the products in place still are suitable. When clients contact their agents for service or information, these requests are given top priority. Compliance are handled properly and thoroughly

Primary Insurer

The insurance company that transfers its loss exposure to another insurer.

Pooling risks (for an insurance company)

The more policies an insurance company issues and the more independent the risks of claims from these policies are, the more predictable will be the number of claims.

Selling to needs

The other cool agent determines the clients needs and then determines which is best suited to address those needs. Two principles of need-based selling include finding the facts and educate the client.

Suitability of recommended products

The other cool agent is this is the correlation between a recommended product and the clients need and capabilities by asking and answering the following questions. What are the clients needs? What products can help meet their needs? Does the client understand the product and its provisions? Is this product in the clients best interest?

Net retention(net line)

The portion of the risk that the ceding insurer retains.

subscribes

Those who purchase these plans through hospital or medical care services.

Mutualization

Transformation of a stock insurer into a mutual insurer.

Treaty Reinsurance

Typical reinsurance contract between two insurance companies, which involves an automatic sharing of the risks assumed.

sales department

Typically the department completing the application and 1-1 appointments with prospective buyers.

1868-Paul v. Virginia

US Supreme Court one states attempt to regulate an insurance company domiciled in another state. Supreme Court sides against the insurance company, ruling that the sale and issuance in not interstate commerce, state rights to regulate insurance.

National Conference of Insurance Legislation (NCOIL)

Was formed to help legislation make informed decisions on Insurance issues that affect their constituents and declare opposition to federal encroachment of state authorities to oversee insurance business as authorized under the McCarran-Ferguson Act of 1945

2001- Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act ( or Patriot Act)

Which amends the bank security act was adopted in response of September 11, 2001 terrorist attack. The patriot act is intended to strengthen US measures to prevent detect and deteriorate terrorist and their funding the act also aims to prosecute international money laundering and financials of terrorism. These efforts include anti-money laundering tools the impacts of banking financial and investment communities

Monoline

Writes only one line of insurance

Risk Retention Group (RRG)

a mutual insurance company formed to insure people in the same business, occupation, or profession (Pharmacists, dentist, or engineers).

Demutualization

a mutual insurer is converted into a stock insurer

captive insurer

an insurer owned by a parent firm for the purpose of insuring the parent firm's loss exposures

insolvent

bankrupt

Managerial System

branch offices are established in various areas, a salaried branch manager is employed by the insurer.

Industrial Insurance

characterized by comparatively small issue amounts, such as $1,000, with premiums collected on a weekly or monthly basis by the agent at the policyowner's home. Quite often it is marketed and purchased as burial insurance.

Advance Premium Assessment Mutual

charges a premium in advance at the beginning of the policy period. If original premiums exceed the operating expenses and losses, the surplus is returned to the policyholder as DIVIDENDS.

Preferred Provider Organization (PPO)

group of healthcare providers that provide services to a specific group ( An employer or a union)often at a reduced rate. It's spelled out in the contact between the employer and health care professionals ( Physicians or the hospital) Insurance Companies can also contract out PPOs to offer services to insureds.

Lloyd's of London

not an insurer, but a society of members and companies that individually underwrite insurance in syndicates. Function: gather and disseminate underwriting information, helps its associates settle claims and disputes and through its members underwrites, provides coverages that might otherwise be unavailable in certain areas.

Broker

represents the insured and themselves (Client)

1970 Fair Credit Reporting Act

requires the fair and accurate reporting of information about consumers. Insurers must inform applicants about any investigations being made and if the report is used to deny coverage or charge higher rates, the insurer must provide the applicant the name of the credit reporting agency conducting the investigation.

1944 United States v. South-Eastern Underwriters Association

ruled that insurance transactions crossing state lines are interstate commerce and are subject to federal regulation.

Catastrophic Perils

war, nuclear risk, floods...catastrophic perils are excluded from coverage