General insurance

retention

1. to reduce expenses and improve cash flow 2. to increase control of claim reserving and claims settlements 3. to fund for losses that cannot be insured

conditional contract

A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable.

Domestic Insurer

An insurance company that conducts business in the state

Foreign Insurer

An insurance company that is incorporated in another state.

Alien Insurer

An insurance company that is incorporated outside the United States.

conditional

Certain conditions must be met in order for policy to pay-out.

Speculative Risk

Involves the opportunity or either loss or gain . Non- insurble

Llyod's Associations

Organizations that does not issue insurance policies but provides a meeting place for underwriters to conduct buisness

insurance

The transfers of a possibility of a loss (risk) to an insurance company, which in turn spreads the cost of unexpected losses to many others.

aleatory

Unequal exchange of value. One party may obtain a far greater value than the other under the contract.

insurance policy

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Material Misrepresentation

a false statement that changes the outcome of issueing a policy

homogeneous

a large number of units having the same or similar exposure to loss

Agent/Producer

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Reciprocity

a mutual interchange of rights and privileges

franternal benefit societies

a nonprofit organization formed to sell insurance only to its members

Applicant/Proposed insured

a person applying for insurance

warranty

a statement guaranteed to be true

authority

admitted and/ authorized, authorized by state

Material misrepresentations (if intentional), breach of warranties, concealment, fraud

all can void the contract

principal

an agent represents regarding contractual agreements with third parties

Captive Agent

an insurance agent who represents only one insurance company or group companies

Broker

an insurance producer not appointed by an insurer and is deemed to represent the client

Representations

are statements believed to be true to the best of ones knowledge, but they are not guaranteed to be true

Avoidance

avoiding risk to not have an accident

Apparent (Perceived) Authority

based on the pricipal's actions

personal

between insurer and insurance

authorities agents can hold

express and implied

If material misrepresentations are intentional they are considered

fraud

Ambiguities

in the contract are always resolved in favor of the insured

hazards

increase chance of loss

Physical hazards

individual characteristics that increase the chances of the cause of loss

Adverse Selection

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

Reinsurance

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

exposure

is a unit of measurement used to determine rates charged for insurance coverage

express

is the authority a principal intends to grant to an agent by means of the agents contract. it is written in a contract

implied

its assumed

Indeminity

key principle in all insurance

Fiduciary

money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker

stock

non-participating policies, owned by stockholders

unilateral

one-sided promise

mutual

participating policies, owned by policy owners

Utmost good faith

parties rely on each other for information

non- admitted

prohibited from transacting insurance in the state

Conditions

provisions in the policy that qualify or place limitations on the insurer's promise to perform

loss

reduction of value, destruction or disappearance of property or person in a policy

Automatic (also known as treaty)

reinsurance is a predetermined, blanket arrangement

Agent's Fiduciary

responsibility includes handling insurer funds in a trust capacity

Law of Large Numbers

s states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.

morale hazards

state of mind that causes indifference towards loss

adhesion

take it or leave it

Acceptance

takes place when an insurer's underwriter approves the application and issues a policy

moral hazards

tendencies towards increased risk

peril

the cause of a loss

Insurer

the company who issues an insurance policy

casualty

the loss of and or damage to property and resulting liabilities (someone else's property)

property

the loss of physical property or of its income producing abilities (personal)

Premimum

the money paid to the insurance company for the insurance company

Pure risk

the only risk that can be insured. With loss only and no financial gain

Insured

the person covered by the insurance company. The person may or may not be the policy owner

Policyowner

the person entitled to exercise the rights and privileges in the policy

facultative reinsurance

they underwrite each application separately.

transfer

transferring of risk to insurance

Misrepresentation

untrue statements on the application

Waiver

when an insurance company receives an application with missing information and issues the policy anyway

Concealment

withholding of information that will result in an imprecise underwriting decision

reduction

you can reduce your exposure for the risk that are out there