Chapter 1 Basic Principles

An agent's authority to bind an insurer to an insurance contract may be granted in the

agent's contract and the insurance company's appointment

Which of the following financial products creates an instant estate, no matter when the date of death?

Life Insurance

A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a

Risk Retention Group- A group-owned insurer whose primary activity consists of assuming and spreading the liability risks of its members is called a risk retention group.

Dividends from a stock insurance company are normally sent to

Shareholders

Who regulates an insuer's claim settlement practices?

State insurance departments

Which of the following outlines the authority given to the Producer on behalf of the insurer?

Producer contract

Which of the following types of insurers limits the exposures it writes to those of its owners?

Captive insurer- An insurer that confines or largely limits the exposures it writes to those of its owners is called a captive insurer.

What type of reinsurance contract between two insurers involves an automatic sharing of the risks assumed?

Treaty reinsurance Proceed- Under treaty reinsurance, each party automatically accepts specific percentages of the insurer's business.

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. This administrator is called a(n)

Attorney-in-fact- The administrator of a reciprocal insurer who manages the premiums collected from the group's members is called an attorney-in-fact.

What is considered the accounting measurement of an insurance company's future obligations to its policyowners?

reserves- The accounting measurement of an insurer's future obligations to its policyholders is reserves.

Dividends from a mutual insurance company are paid to whom?

Policyholders- Mutual insurance companies are owned by policyowners, to whom dividends are paid.

Which of the following describes a participating insurance policy?

Policyowners are entitled to receive dividends- A participating insurance policy is one in which the policyowner receives dividends deriving from the company's divisible surplus.