XCEL Chapter 1: Basics of Principles of Insurance

The actuarial department calculates policy rates, reserves, and dividends.

Actuarial department

An admitted or authorized insurer is an insurer who has received a certificate of authority from a state's department of insurance authorizing them to conduct insurance business in that state.

Admitted Insurer

A Broker represents themselves and the insured (i.e., the client or customer).

Broker

A Certificate of Authority is a license issued to an insurer by a department of insurance (or equivalent state agency), which authorizes that company to conduct insurance business in that particular state.

Certificate of Authority

The claims department is responsible for processing, investigating, and paying claims.

Claims Department

Divisible surplus is the amount of earnings paid to policyowners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

Divisible Surplus

A Domestic Insurer is an insurer with its principal or home office in a state where it is authorized.

Domestic Insurer

A Foreign Insurer is an insurer with its principal office or domicile location in a state different from the state it is transacting insurance business.

Foreign Insurer

Fraternal Benefit Societies are nonprofit benevolent organizations that provide insurance to its members.

Fraternal Benefit Society

Industrial Insurers make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insurers include home service or debit insurers.

Industrial Insurer

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

Insurance

The insured is the customer receiving insurance protection under an insurance policy.

Insured

The insurer is the insurance company.

Insurer

Lloyds of London is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance.

Lloyds of London

A multi-line insurer is an insurance company or independent agent that provides a one-stop-shop for businesses or individuals seeking coverage for all their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs.

Multi-line Insurer

Mutual Insurance Companies are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.

Mutual Insurance Company

A nonparticipating insurance policy, typically issued by stock companies, do not allow policyowners to participate in dividends or electing the board of directors.

Nonparticipating policy

A participating plan is an insurance policy under which the policyowners share in the company's earnings through receipt of dividends and also elect the company's board of directors.

Participating Plan

Private or commercial insurance companies are companies owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned.

Private (Commercial) Insurer

A Reciprocal Insurer is an unincorporated organization in which all members insure one another.

Reciprocal Insurer

A stock company is an insurance company owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.

Stock Insurance Company

The underwriting department is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications.

Underwriting Department

A Captive Insurer is an issuer established and owned by a parent firm for the purpose of insuring the parent firm's loss exposure.

Captive Insurer

A Risk Retention Group is a group-owned liability insurer which assumes and spread product liability and other forms of commercial liability risks among its members.

Risk Retention Group

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

Self-Insurers

An Alien Insurer in the United States is an insurer whose principal office and domiciled location is outside the country.

Alien Insurer

A reinsurer is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.

Reinsurer

A non-admitted or unauthorized insurer is an insurer who has not received a certificate of authority from a state's department of insurance authorizing them to conduct insurance business in that state.

Non-admitted Insurer

Reinsurance is the acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.

Reinsurance

Surplus Lines Insurance is nontraditional insurance only available from a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers.

Surplus Lines Insurance