Ad Banker NY P&C

Independent Agency

- can rep many insurers -retains ownership of accounts -paid a commission

Producer's Responsibility to the Insurance Applicant or Insured

- fwd premiums on a timely basis -seek and gain knowledge of applicants needs -review and evaluate teh apps current insurance coverage limits and risks -serve best interests even if they rep insurer -recomend best coverage

Stock Insurance Company

-owned by stockholders -D&O Direct - taxable corp divs to stockholders -divs not guaranteed - Issue non-participating policies

Four Elements of a Legal Contract

1. Competent Parties (not minors, not DUI) 2. Legal Purpose 3. Agreement (Offer and Acceptance) 4. Consideration (value xchanged)

Hazard

A condition that increases the frequency or severity of a loss.

Valued Contract

A contract that pays a stated amount in the event of a loss (disability insurance/life insurance). MOST ARE NOT VALUED

Self Insurance

A form of risk management whereby a part of the firm's earnings is earmarked as a contingency fund for possible future losse Purchase of reinsurance is available as well

Gramm-Leach-Bliley Act (GLBA)

A law that requires banks and financial institutions to alert customers of their policies and practices in disclosing customer information.

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. Each member asummes a portion of the risk

Producer (Agent)

A person or agency appointed by an insurance company to represent it and to present policies on its behalf.

endorsement

A policy form that alters or adds to the provisions of a property and casualty insurance contract.

Residual Markets

A private coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers.

Parol Evidence Rule

A written contract may not be altered without the written consent of both parties.

Fair Credit Reporting Act

Act that protects privacy of background information and ensures that information supplied is accurate applicant has right to revewi and challenge report and agency must investiagte within 6 months of challenge. insurer is not responsible for this

Career Agency System

Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company.

Indemnity Contract

An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs.

Adverse Selection

An imbalance created when risks that are more prone to losses than the average (standard) risk are the only risks seeking insurance within a specific marketplaceAn imbalance created when risks that are more prone to losses than the average (standard) risk are the only risks seeking insurance within a specific marketplace

Admitted (Authorized) Insurer

An insurance company authorized and licensed to transact business in a particular state.

Foreign Insurer

An insurance company that is incorporated in another state.

Non-Admitted (Unauthorized) Insurer

An insurer that has not sought approval (or) has not been able to obtain approval to transact business from the insurance regulator in this state.

Apparent Authority

Authority created when a producer exceeds expressed authority, and the insurer does nothing to counter it.

Merchant Marine Act of 1920 (the Jones Act)

Because workers' compensation laws do not apply to seamen, the Jones Act allows insured seamen to make claims for injuries suffered during the course of employment. It also regulates maritime commerce in U.S. waters, transportation of cargo, and the rights of seamen.

Contract of Utmost Good Faith

Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive has been made.

Conditional Contract

Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions.

Estoppel

Cannot deny a fact that was previously admitted to be true

Speculative Risk

Chance of loss no loss or gain

Motor Carrier Regulatory and Modernization Act (the Motor Carrier Act of 1980)

Deregulated trucking have to show evidence of financial via bond guarantee or qualification as self insurer

Personal Producing General Agent

Does not recruit career agents. Sells insurance for carriers it is contracted with and maintains its own office and staff.

FIO

Established by Dodd Frank -monitors insurance industry -underserved and under insured communities

insurance company management

Execs Acturaial UW Marketing/Sales Claims

Producer's Responsibilities to the Insurer

Fiduciary duty to the insurer in all respects, especially when handling premium funds. Must keep premium funds in a trust account separate from other funds and forward to insurer promptly. Must report any material facts that may affect underwriting. Responsible for soliciting, negotiating, selling, and cancelling the insurance policies with the insurer. Duty to only recommend the purchase of suitable policies.

Surplus (excess) Lines Insurance

Finds coverage when insurance cannot be obtained through admitted carriers. It can be placed with non-admitted carriers. Regulated by each state and must be done through Surplus Lines Brokers/Producers

Financial Anti-Terrorism Act (USA Patriot Act)

Imposes record keeping and government reporting requirements on banks, financial institutions and non-financial businesses for specific financial transactions and customer financial records

Domestic Insurer

In state

Reinsurance Companies

Insurers (ceding company) transfer of risk to other insurers (reinsurance insurer) assumes all or portion of the risk from primary or ceding insurer

Fraud

Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right. 5 elements 1)False statements that pertains to material fact 2) Disregard for victim 3)victim makes deciisdion acts upon or relies on false statement 4) Decision or action results in harm

Insurable Risk

Large number of homogenous units or groups with the same perils chance of risk is calculable loss is measurable premium is affordable loss is accidental

Fraternal Benefit Societies

Life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.

Private vs. Government Insurers

Most insurance is private Gov can step in to offer alternative where insurance is too cat or underprovided by the markets

NAIC

National Association of Insurance Commissioners -research -promotes uniformity -no legal authority

Unilateral Contract

Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.

personal contract

Owner cannot transfer or assign ownership of an insurance policy (property and casualty) to another person.

Non-Personal Contract

Owner may transfer or assign ownership of a life or health insurance policy to another person.

Physical/Moral/Morale Hazards

Physical condition increase chance of loss Dishonesty that increases chance of loss Attitude that increase chance of a loss``

Direct Mail or Direct Response Company

Sells insurance policies directly to the public with licensed employees or contractors. A marketing system utilizing direct mail, newspapers, magazines, radio, television, internet, web sites, call centers and vending machines.

Risk Management

Sharing Transfer Avoidance Reduction Retention

Insurance Regulation

State Level Leg writes and passes laws Commissioner appointed or elected by governer will establish rules and regulations to promote the enforcement of relates laws

Warranties

Statements made by the applicant guaranteed to be true - if discovered untrue coverage is voided

Representations

Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true. CAN be withdrawn

attained age

The age of the insured at a determined date.

effective date

The date when an insurance policy begins (also known as the inception date).

lapse date

The date when insurance coverage ends; if not cancelled prior, policy will terminate by end of grace period if premium is not paid.

Aleatory Contract

The exchange of value is unequal. (loss or no loss this is always true)

issue age

The individual's age when a policy is issued.

Principle of Indemnity

The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured.

Reasonable Expectations

The reasonable expectations of policy owners or beneficiaries will be honored even though the strict terms of the policy do not support these expectations

Loss

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

Tort Law

Torts are civil wrongs; they're not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party.

Hold Harmless Agreement

Transfers liability from one party to another

Types of Reinsurance

Treaty Agreements - Reinsurance agreement that covers all risks contained in the subject line(s) of business automatically. Facultative Agreements - Reinsurance agreement that allows ceding and reinsurance companies the opportunity to negotiate coverage for individual risks.

Risk

Uncertainty concerning the occurrence / chance of a loss

Waiver

Voluntary surrender of a known right claim or privilege

Misrepresentations

a false statement in the application that can render the contract void if material to acceptance of the risk (does not reflect the truth).

broker

a licensed individual negotiates contracts on behalf of the applicant reps applicant

Pure Risk

a risk that presents the chance of loss but no opportunity for gain (INSURABLE)

Law of Agency

agent or producer acts on behalf of the other party (principal) insurer

Applicant

applying for insurance

Producer Implied Authority

authority public assumes agent has prov quotes accepting premium completing apps

Producer Express Authority

authority written into contract

Peril

cause of loss

Exposure

condition of being at risk for a loss

Financial Rating Services

evaluate and rate the financial stability of insurance companies ratings are public

McCarran-Ferguson Act (1945)

federal government cannot regulate insurance (unless cat, there is still oversight)

Violent Crime Control and Law Enforcement Act of 1994

felony to engage in insurance if convicted at state or federal level of dishonesty or breach of trust

Contract LAw

formation and enforcement of contracts

Fraud and False Statements (Fraudulent Insurance Act)

fraud = false statement or deceit anyone engaged in business of insurance who is caught - no more than 50k and no more than 10 years prison or both - 15 years if insurer loses soundness becuase of it -if embezzled or stole does not exceed 5k than 50K and max 1 year or both threats = 50k 10 year felony involving breach of trust 50k 5 year

Lloyds of London

group of underwriters "Syndicates" building and clerical work is shared syndicate manager is AIF`

Reciprocal Insurance Company

group owned for risk sharing unincorporated each sub assumed part of risk Attorney in Fact manages exchange

Insurance Agencies

independent organizations that recruit, contract with, and support sales agents and producers

Contract of Adhesion

insurer prepares and presents on a take it or leave it bais

Insurance Agents or Producers

licensed individuals representing an insurance company when transacting insurance

Insurers

manufacture and sell insurance coverage by way of insurance policies or contracts

Insurability

meet UW reqs

Alien Insurer

non - US

Void Contract

o An agreement without legal effect because it was made illegally or it was declared void by the courts because it doesn't contain all the elements of a legal contract

Insurable event

o Event that may cause loss damage or liability

insurance contract

o Legal contract purchased to indemnify against loss/damage/liability arising from unexpected event o Exchange of premium for larger risk

Mutual Insurance Company

owned by policyholders w they elect bopard of trustees non-taxable div of unused prem divs not guaranteed issue participating polices

Assignement

policy owners may assign or transfer the rights of an insurance contract without notifying the insurer

Direct Writing System

producer or agent is employed by insurer insurer owns accounts

insurable interest

something of value that, if lost, would cause you financial harm

Mass Marketing Sysem

target specific group (AARP)

Rescission

termination of policy as if it never existed

Insurer (Principal)

the company who issues an insurance policy authority by which producer must abide responsible for producer when acting in scope of authority

Risk Management

the determination of correct strategies asses potential losses manage risk

Exclusive or Captive Agency System

the insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.

Insured

the person or business for which the insurer assumes the risk

Underwriting

the process of selecting, classifying, and pricing applicants for insurance

Concealment

the willful hiding or obscuring of material facts pertinent to the issuance of insurance concealment results in denial of coverage and may void policy

TRIA and Extensions

· TRIA (and Extensions) o Federal govt shares terror losses with private market o Keeps p&c costs lower o Details Below