Types of Insurers

Exclusive Agency Systems/ Captive Agents

- 1 agent represents 1 company - Exclusive - Commissions on personal sales - Renewals can only be placed with the appointing insurer.

CHAMPUS

The Civilian Health and Medical Program of the Uniformed Services, replaced by TRICARE.

Dividends paid out from mutual insurers are considered a non-taxable return of overcharged premium, whereas dividends paid out from stock insurers are

simply the profits experienced by the company

Private insurers offer insurance

to people through the individual market.

Independent Agency System/ American Agency System

- 1 independent agent represents several companies. - Nonexclusive. - Commissions on personal sales. - Business renewal with any company.

Alien insurer

An insurance company incorporated outside of the United States.

Foreign insurer

An insurance company that is incorporated in another state or territory. A company chartered in California would be foreign in New York.

Financial Solvency Status (independent rating service)

Determines an insurance companies financial strength and integrity. Based on prior claims experience, investment earnings, reserves, management, etc.

Social Security

Federal social insurance program which provides retirement, disability, and survivors benefits. Also referred to as OASDI, or Old Age, Survivors, and Disability Insurance.

Reciprocals

Insurance resulting from an interchange of of reciprocal agreements of indemnity among persons known as subscribers. An attorney manages exchanges of losses and expenses, which are shared among subscribers.

Participating Insurers

Insurers that issue dividends to their policyholders.

Nonparticipating policies

Issued by stock companies, policyowners don't share in profits or losses.

Stock insurers

Owned by the stockholders who provide the capital necessary to establish and operate an insurance company and who share in the profits and losses. Also called capital stock insurers.

Group Life Insurance

life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance

Dividends

Earnings distributed to stockholders. A return of overcharged premium, which is not taxable.

Medicare

Government health insurance coverage for individuals over the age of 65, and special needs individuals.

TRICARE

Health insurance coverage for active duty and retired members of the uniformed services and their dependents.

Marketing (distribution) systems

How insurance companies market their products: through agents or direct solicitations to the customers.

Participating policies

Policyowners are entitled to dividends, or a return of excess premiums (nontaxable).

Insurers can be grouped into two main types:

Private and Government.

The Mayflower Insurance Company is a stock insurance company. What is its operating objective? Select one: a. To have the lowest net premium b. To make a profit for stockholders c. To make a profit for policyholders d. To have the lowest gross premium

To make a profit for stockholders

Transformation of a stock insurer into a mutual insurer is termed

mutualization, and the reverse is termed demutualization.

Medicaid

A federal and state assistance program that pays for health care services for people who cannot afford them.

HMOs are medical insurance companies that:

HMOs provide the medical care and finances required to fund health care services. Subscribers obtain medical care through hospitals and physicians that have contracted with the HMO.

Two common types of service providers are:

HMOs- Health Maintenance Organizations, and PPOs- Preferred Provider Organizations.

Blue Cross Blue Shied is which type of insurer? Select one: a. Stock Insurer b. Mutual Insurer c. Service Provider d. Fraternal Benefit Society

Service Provider

Mutual insurers are distinct from stock insurers in two primary ways:

They lack capital stock, and Profits are distributed among their members - the policyholders.

Direct Response Marketing System

- No agents. - Company advertises directly to consumers (through mail, Internet, television, other mass marketing). - Consumers apply directly to the company.

Risk Retention Groups (RRG)

A liability insurance company owned by its members. Members are exposed to similar liability risks by virtue of being in the same business or industry.

Government Insurance

redistributes incomes to help people afford costs associated with fundamental risks.

General Agency System

- General agent-entrepreneur represents 1 company. - Exclusive. - Compensation and commissions. - Appoints subagents

Fraternal Benefits Society

Also known as fraternal insurers or simply fraternals, are special types of mutual insurers/nonprofit religious, ethnic or charitable organizations that provide insurance exclusively to their members. Exempt from federal tax and state tax because they considered charitable organizations. Fraternal benefit societies are mostly involved in life and health insurance.

Authorized/Admitted insurers

Have met the financial requirements set by the state and been issued a Certificate of Authority by the state department.

Mutual companies pay dividends to which of the following in order to return overcharged premiums? Select one: a. Stockholders b. Policyholders c. Insureds d. Debtors

Policyholders

Noncommercial Organizations or Service Providers

are not technically "insurers" and do not sell insurance. They are better described as service organizations that provide prepaid health plans for medical, surgical, and hospital expenses.

Included in the private insurers are two groups of commercial insurers:

Stock insurers, and Mutual insurers.

Domestic insurer

An insurance company that is incorporated in the state. The companies home office is in the same state in which it was formed -- it is domicile.

Which type of insurer/organization is in the business of insurance to make a profit? Select one: a. Government b. BlueCross BlueShield c. Noncommercial organization d. Commercial

Commercial

Mutual insurers

Owned by policyowners and issue participating policies.

Unauthorized/Nonadmitted insurers

Have not been approved to do business in the state. Most states have laws that prohibit these companies from conducting business in the state, except through licensed excess and surplus lines brokers.

Lloyd's Associations

A group of individuals who operate an insurance mechanism where each individual underwriter assumes a part of each risk. Operate almost exclusively as property insurance. Not an insurance company.

Surplus lines

Insurance for which there is no readily available admitted market. Specialize in offering insurance to the high risk market on an unregulated basis.

Managerial System

- Branch manager (supervises agents) - Salaried - Agents can be insurer's employees or independent contractors.

Certificate of Authority

A document that authorizes a company to start conducting business and specifies the kind(s) of insurance a company can transact. It is illegal for an insurance company to transact insurance without this certificate.

PQR only sells accident and health insurance policies, covering hospital, medical and surgical costs. PQR operates on a not-for-profit basis. Based on the information provided, PQR Insurer CANNOT be a: Select one: a. Noncommercial organization b. Stock insurer c. Government insurer d. Private insurer

Stock insurer

PPO's (Preferred Provider Org)

provide discounted medical services to members. A group wishing to provide health care services to its members forms a PPO. The PPO receives a special discounted rate by using certain medical practitioners, hospitals and clinics. In exchange, the PPO will refer members to these medical professionals. An insurance company may contract with a PPO to provide medical services to insureds.