Basic Principles of Insurance

What does the actuarial department do?

Calculates policy rates, reserves, and dividends.

What is the underwriting department?

Department responsible for reviewing,approving/declining applications, and assigning risk classifications

What is divisible surplus?

Earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

What is a risk retention group?

Group-owned liability insurer that spreads product liability and other forms of comercial liability risks among members.

What is a stock insurance company?

Insurance company owned and controlled by stockholders whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.

What is an Admitted Insurer?

Insurer authorized to conduct insurance business in a state.

What is a Captive Insurer?

Insurer established and owned by a parent firm for the purpose of insuring the parent firm's loss exposure

What is an Alien Insurer?

Insurer whose principal office and domiciled location is outside the country

What is a Foreign Insurer?

Insurer with its principal office in a different state from where it conducts business.

What is a Domestic Insurer?

Insurer with its principal or home office in a state where it is authorized

What is a Certificate of Authority?

License issued to an insurer by a department of insurance, which authorizes that company to conduct insurance business in that particular state

What are Fraternal Benefit Societies?

Nonprofit organizations providing insurance to members.

What is surplus lines insurance?

Nontraditional insurance for substandard or unusual risks that is not available through private or commercial carriers

What is the role of the claims department?

Process, investigate, and pay claims.

What is reinsurance?

Reinsurers accept portion of the risk underwritten by another insurer who has contracted for the entire coverage

What does a Broker do?

Represents themselves and the insured.

What are Industrial Insurers?

Specialized insurers providing policies with small face amounts and weekly premiums. also called home service or debit insurers

Who is the insured?

The customer receiving insurance protection under an insurance policy.

Who is the insurer?

The insurance company.

What is Lloyds of London?

A group of individuals and companies that underwrite unusual insurance.

What is a private (commercial) insurer?

A privately-owned insurance company that offer one or more insurance lines. NOT government owned.

What is a multi-line insurer?

An insurance company or independent agent that provides coverage for all insurance needs. "one stop shop"

What is a nonparticipating policy?

An insurance policy that does not allow policyowners to participate in dividends or elect the board of directors. typically issued by stock companies

What is a participating plan?

An insurance policy where policyowners share in the company's earnings through reciept of dividends and elect the board of directors.

What is a non-admitted insurer?

An insurer who has not received authorization to conduct insurance business in a state. "unauthorized insurer"

What is a reciprocal insurer?

An unincorporated organization where members insure one another.

What is a mutual insurance company?

characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance

What are self-insurers?

establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company.

What is insurance?

The transfer of risk through the pooling or accumulation of funds.

What is a reinsurer?

a company that provides financial protection to insurance companies. Handle risks that are too large for insurance companies to handle alone & allow insurers to obtain more business than they would otherwise be able to.