Chapter 1 XCEL
Certificate of Authority
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.
Domestic Insurer
A Domestic Insurer is an insurer with its principal or home office in a state where it is authorized.
Foreign 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
Reciprocal Insurer:
A Reciprocal Insurer is an unincorporated organization in which all members insure one another.
Risk Retention Group
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
Multi-line Insurer:
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
Departments within an Insurance Company
Sales- completing apps,1-1 appts Underwriting- review apps, investigate, gain info Claims- processing, investigating, paying claims for losses incurred by insureds
Surplus Lines Insurance:
Surplus Lines Insurance is nontraditional insurance only available form a surplus lines insurer. They offer coverage for substandard or unusual risks not available through private or commercial carriers
1959-intervention by the SEC.
The Supreme Court ruled that federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulation.
Actuarial department
The actuarial department calculates policy rates, reserves, and dividends
Claims Department:
The claims department is responsible for processing, investigating, and paying claims.
Insured
The insured is the customer receiving insurance protection under an insurance policy.
Insurer:
The insurer is the insurance company
National Conference of Insurance Legislators (NCOIL)
to help legislators make informed decisions on insurance issues that affect their constituents and declare opposition to federal encroachment of state authority to oversee insurance business, as authorized under the McCarran-Ferguson Act of 1945.
Fraternal Benefit Society
Fraternal Benefit Societies are nonprofit benevolent organizations that provide insurance to its members.
1970-Fair Credit Reporting Act
, which is the authority that requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application.
1944-United States v. Southeastern Underwriters Association (SEUA)
-Supreme Court ruled that the insurance industry is a form of interstate commerce. -This decision did not affect states' power to regulate insurance, but it did nullify state laws that conflicted with federal legislation. The result of the SEUA case was to shift the balance of regulatory control to the federal government.
1945-The McCarran-Ferguson Act
-This law made it clear that the states' continued regulation of insurance was in the public's best interest -However, it also made possible the application of federal antitrust laws to the extent that [the insurance business] is not regulated by state law. -This act led each state to revise its insurance laws to conform to the federal laws.
three systems that support the sale of insurance through agents and brokers
-career agency system -personal producing general agency system -managerial system -independent agency system
1958-intervention by the FTC.(Federal Trade Commission)
-sought to control the health insurance industry's advertising and sales literature. -Additional attempts have been made by the FTC to force further federal control, but none have been successful.
Broker
A Broker represents themselves and the insured (i.e., the client or customer).
Captive Insurer
A Captive Insurer is an issuer established and owned by a parent firm for the purpose of insuring the parent firm's loss exposure.
Non-admitted Insurer:
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
Nonparticipating policy:
A nonparticipating insurance policy, typically issued by stock companies, do not allow policyowners to participate in dividends or electing the board of directors.
Participating Plan:
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
Reinsurer:
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.
Self-Insurers:
A self-insurer establishes a self-funded plan to cover potential losses instead of transferring the risk to an insurance company.
Stock Insurance Company:
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.
Key People Within an Insurance Company(producers)
Agent- represent insurer which sponsors them Brokers- represent themselves and the insured Solicitor- represent and solicit insurance on behalf of agent Service Representatives- employees of an insurer
Alien Insurer
An Alien Insurer in the United States is an insurer whose principal office and domiciled location is outside the country.
Admitted Insurer
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
Divisible Surplus
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.
health maintenance organization (HMO)
HMOs offer a wide range of health care services to member subscribers. For a fixed periodic premium paid in advance of any treatment, subscribers are entitled to the services of specific physicians and hospitals contracted to work with the HMO. Unlike commercial insurers, HMOs provide financing for health care plus the health care itself. HMOs are known for stressing preventive health care and early treatment programs.
Industrial Insurer
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.
Lloyds of London
Lloyds of London is NOT an insurer, but a group of individuals and companies that underwrite unusual insurance
Mutual Insurance Company:
Mutual Insurance Companies are insurance companies characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.
Private (Commercial) Insurer
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
Reinsurance:
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.
Insurance
The transfer of risk through the pooling or accumulation of funds
Underwriting Department:
The underwriting department is the department within an insurance company responsible for reviewing applications, approving or declining applications, and assigning risk classifications.
1868-Paul v. Virginia.
This case, which the U.S. Supreme Court decided, involved one state's attempt to regulate an insurance company domiciled in another state. The Supreme Court sided against the insurance company, ruling that the sale and issuance of insurance is not interstate commerce, thus upholding states' right to regulate insurance.
preferred provider organization (PPO)
Under the usual PPO arrangement, a group desiring healthcare services (e.g., an employer or a union) will obtain price discounts or special services from certain select health care providers in exchange for referring its employees or members to them. PPOs can be organized by employers or by the health care providers themselves. The kind of services provided is spelled out in the contract between the employer and the health care professional (i.e., a physician or a hospital). Insurance companies can also contract with PPOs to offer services to insureds.
Key People Within an Insurance Company
Underwriter- identifies and classifies the amount of risk represented by an applicant coverage provided? how much? Actuary- person who calculate policy rates, reserves, and dividends. cost of insurance as a whole Adjuster- person who engages in investigative work to obtain information for adjusting, settling, or denying insurance claims.
State Guaranty Associations (or funds)
are funded by insurance companies through assessments and exist to protect consumers if an insurer becomes insolvent
Reserves
are the accounting measurement of an insurer's future obligations to its policyholders.
Personal Producing General Agencies (PPGA)
do not recruit, train, or supervise agents. They primarily sell insurance.
Liquidity
indicates a company's ability to make unpredictable payouts to policyowners.
Career Agencies
recruit, train, and supervise agents through managers or general agents. They primarily build staff.
Independent agents (American Agency System)
represent any number of insurance companies through contractual agreements.