Introduction to Insurance 1

Dividends issued by stock insurers are paid to:

Stockholders Stock insurers issue taxable corporate dividends to stockholders.

All of the following are characteristics of mutual insurers

-Surplus premiums may be returned as dividends -Policyholders elect the board of directors -Mutual insurers provide insurance to members

When a consumer reporting agency receives a request to issue correct information in a consumer report, the agency must reinvestigate within what time period?

6 months The consumer reporting agency has a maximum of 6 months to reinvestigate the facts of the consumer report

Under the Fair Credit Reporting Act, if a consumer reports to a consumer reporting agency that they are a victim of fraud, the agency must put a fraud alert on the consumer's file for at least how long?

90 days

Morale Hazard

A condition of carelessness or indifference that increases the frequency or severity of loss.

Adverse Selection

Adverse selection is the tendency of wanting insurance for higher risks compared to average or lower risks, which creates an imbalance for insurers. Insurers can protect themselves from adverse selection by charging a higher premium for less favorable risks or by denying coverage,

agent responsibilities

Agents represent the insurer in soliciting, receiving, and forwarding applications, and they provide quotes and collect premiums.

known as a captive agent?

An exclusive agent is also known as a captive agent. Captive agents are under agreement to represent a single insurer

Moral Hazard

Dishonesty and intentionally causing a loss

Lloyd's Association

Is individually liable for each risk they assume

Dividends issued by mutual insurers are paid to?

Mutual insurers may issue dividends to policyholders.

options for managing risks are

STARR -sharing -transfer -avoidance -reduction -retention

The McCarran-Ferguson Act of 1945 set what standard for the insurance industry?

The McCarran-Ferguson Act of 1945 determined that the federal government cannot regulate the insurance industry in areas where states have the authority to set regulations. basically to resolve the disagreement

the law of agency determines that

The acts of the producer bind the principal- Under the Law of Agency, the principal is responsible for the acts of the producer and grants the producer authority through the agency contract. An act of the producer is considered an act of the principal.

Which insurance company department determines the probability of loss and determines premium rates?

The actuarial department interprets statistical information to determine the probability of losses and determine the premium rates used by the insurer.

Residual Market

The residual market exists to ensure coverage is available when insurance companies in the regular market reject an applicant as too risky

Any criminal and civil penalties charged against someone who violated the Violent Crime Control and Law Enforcement Act are brought by the?

US Attorney General

insurers often publish their standard rates in their manuals. These general rates are determined by:

actuaries

insurer is both owned and controlled by its policyholder?

captive insurers(policy holders = parent corporation)

What's not an insurable risk?

catastrophic perils

peril

cause of loss

Which federal entity administers the Terrorism Insurance Program created by TRIA?

department of treasury(secretary)

a type of authority producers have when they represent an insurer?

implied authority

principal

is the insurance company

agent

is the producer operating

The basis for an insurance claim made by a policyholder is a

loss A loss is a reduction, decrease, or disappearance in value that serves as the basis of an insurance claim.

The shifting of risk of loss to another party is known as which of the following?

risk transfer (Starr)

The underwriting department

selects the risks and selects the premium rate that will determine the premium for a specific insured

An insurer with capital that is divided into shares, and is owned by shareholders, is considered a:

stock insurance company -A stock insurance company is owned by its stockholders, or shareholders, and its capital is divided into shares. Corporate taxable dividends are payable to stockholders.

Which of the following places insurance with a non-admitted insurer when insurance cannot be placed with an admitted insurer?

surplus line producer-Only a surplus lines producer may place business directly with a non-admitted insurer.

Lloyd's associations are composed of groups of underwriters and brokers, known as:

syndicates