Chapter 1

Social Security - Medicare - Medicaid

3 Types of Government Insurance

The company transferring the risk

Ceding Company

not taxable.

Although mutual companies almost always give dividends, they can never guarantee them. In this case, dividends are

are taxable.

Although stock companies can give dividends and not give dividends, when they do, they are operating on a mixed plan. In this case, dividends

assess policyholders a premium only when losses are incurred.

Assessment insurers

work for only one insurer

Captive agents

are in the business of selling insurance for a profit.

Commercial Insurers

stock and mutual insurers.

Commercial insurance is divided into two main groups:

stockholders

Dividends from a stock company are paid to

are special types of mutual companies/ nonprofit religious, ethnic or charitable organizations that provide insurance solely to their members. For example, Knights of Columbus.

Fraternal benefit societies

Social insurance provides protection against universal risks by redistributing income to help people who cannot afford the cost of incurring such losses themselves.

Government Insurance

Serviceman's Group Life Insurance, which is life insurance for members of the military.

Government Insurance: S.G.L.I.

- this is health insurance for members of the military.

Government Insurance: Tri-Care

are the ways insurance products are marketed and sold to the public.

HOW INSURNCE IS SOLD: Distribution Systems

home service insurance is industrial insurance sold by home service or debit life insurance companies. Face amounts are small; usually $1,000 to $2,000 and premiums are paid weekly.

Home Service Insurers

work for themselves or for several insurers nonexclusively.

Independent agents

captive/career agents or independent agents.

Insurance can be purchased through licensed insurance producers, who are either agents or brokers, or through a number of other ways. Agents are either

Members of the association form syndicates to underwrite and issue insurance- like coverage. This is a group of investors who share in unusual risk.

Lloyd's of London is not an insurance company

An insurance company selling more than one line of insurance

Multi-line insurer

are commercial insurers that are owned by their policyholders.

Mutual Companies

the policyholders.

Mutual company dividends are paid to

is a life insurance company that shares its surplus earnings with its insureds. Nonparticipating companies do not.

Participating company

are unincorporated groups of individual members that provide insurance for other members through indemnity contracts. Each member acts as both insurer and insured and are managed by Attorney in Fact.

Reciprocal insurers

the company assuming the risk

Reinsurer Company

make arrangements with other insurance companies to transfer a portion of their risk to the reinsurer.

Reinsurers

are mutual companies formed by a group of people in the same industry or profession. Examples would be pharmacists, dentists, and engineers.

Risk retention groups

retain risks and must have a large number of similar risks and enough capital to pay claims. However, they may save money if the loss experience is lower than the expected costs.

Self Insurers

participating insurers

Since mutual insurers issue dividends to policyholders, they are referred to as

are incorporated companies owned by their stockholders.

Stock Companies

policyholders do not receive dividends.

Traditionally, stock insurers are called nonparticipating insurers because

Transformation of a mutual insurer into a stock insurer

demutualization

Transformation of a stock insurer into a mutual insurer

mutualization