General Insurance, completing the application, underwriting and delivering the policy.
three types of agent authority
- express - implied - apparent
Strategies used by underwriters to prevent adverse selection
- restriction of coverage - refusal to accept a risk - accepting a risk at a higher rate
Four elements of an insurance contract
-agreement (offer and acceptance) - consideration - competent parties - legal purpose
According to the Law of Agency, a principal is represented by whom?
Agent or producer
in order to transact insurance within a given state, an alien insurer must first obtain what?
Certificate of Authority
Insurance is used to transfer what to the insurance company?
Financial responsibility for loss
an insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?
Foreign
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable Interest and consent
what do individuals use to transfer their risk of loss to a larger group?
Insurance
insurance is a contract that protects the insured from what?
Loss
Five characteristics of an ideally insurable risk
Loss must be: 1) due to chance 2) definite 3) statistically predictable 4)not catastrophic 5) coverage cannot be mandatory
a person who does not lock the doors to his or her house shows an indifferent attitude. What type of hazard is this?
Morale hazard
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
Mutual insurer
What are the three types of hazards
Physical, moral, and morale
If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
Provide the applicant a Disclosure Authorization Notice
Mutual Company
The type of insurance company organized to return any surplus money to its policyholders
Risk
Uncertainty of loss
pure risk
a situation in which a person can only experience a loss and no gain
Certificate of Authority
a state-issued document empowering an insurance company to become an admitted insurer
Foreign insurer
an insurance company that is formed under the laws of another state
when a change needs to be made on the application for insurance, which is the best method for correcting the information?
complete a new application or ask the applicant to initial the correction on the original application
Hazards
conditions that increase the chance of loss
Certificate of Authority
document required for an insurance company to transact business
three types of insurers
domestic, foreign, and alien. Insurers are classified according to their domicile
Alien Insurer
insurer formed under the laws of another country
stock company
insurer organized to return a profit to the stockholders
What entities make up the Medical Information Bureau?
insurers
Law of Large Numbers
law that is the foundation of the statistical prediction of loss upon which rates for insurance are calculated
Fair Credit Reporting Act
law that protects consumers from the circulation of inaccurate or obsolete information
underwriting
process that insurance companies use to determine whether or not an applicant is insurable?
what type of risk is insurable?
pure risk
Inspection report
report that provides information about the applicant's hobbies, habits and financial status
best way to handle incomplete insurance applications
return the application to the applicant for completion
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
send the application back for signature
who owns stock companies?
stockholders
if an applicant does not receive his or her insurance policy, who would be held responsible?
the agent
whose responsibility is it to determine that all the questions on an insurance application are answered?
the agent's
peril
the causes of loss insured against in an insurance company
whom does the insurance agent represent?
the insurance company
in the agent/insurer relationship, who is considered the principal?
the insurer
when agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
the insurer
Loss
the reduction, decrease or disappearance of value of the person or property insured in a policy
Fraternal Insurer
type of insurer that is a voluntarily formed organization that provides insurance benefits for members of an affiliated lodge or religious organization with a representative form of government.
Speculative risk
wagering on a sporting event
moral hazard
when an applicant conceals relevant health information on the application
when would a misrepresentation on an insurance application be considered a fraud?
when it is intentional and material
adverse selection
when risks with higher probability of loss are seeking insurance more often than other risks
when is the offer usually made on a contract
when the insurance application is submitted
in forming an insurance contract, when does an acceptance usually occur?
when the insurer approves a prepaid application
when does an insurance policy go into effect?
when the policy is delivered and the premium is paid
