AD Banker 20-44 Chapter 1

Non-admitted (unauthorized) insurer

- has either applied for authorization to do business in this state or was declined or they have not applied. - not authorized to transact insurance in this state. - Surplus and excess lines insurance can be placed through non-admitted carriers.

Reinsurance Companies

- insurance company assumes all or a portion of a risk from a primary or ceding insurance company. - reinsurance transfers risk among insurance companies. - The insurer requesting reinsurance is the primary or ceding company. - The insurer sharing in the risk is the reinsurance company. - Consumer inquiries must originate with the ceding company, which then obtains reinsurance.

Lloyds of London

- not an insurance company - group of underwriters called syndicates specializing in a certain risk. - Lloyds provides a meeting place and clerical services for members trained in the business of insurance. - Members are individually liable for each risk they assume. - Coverage provided is underwritten by a syndicate manager such as an attorney-of-fact or individual proprietor.

Mutual Insurance company

- owned by policy holders, also referred to as members. - A board of trustees or directors direct the company operations and is elected by policyholders. - Policy holders receive non-taxable dividends as a return of the unused premium when declared by the directors. - Dividends are not guaranteed. - Mutual insurers issue participating policies.

National association of Insurance Commissioners (NAIC)

-Provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulations. -The association promotes uniformity among states. Members may accept or reject the recommendations. -The NAIC has no legal authority to enact or enforce insurance laws.

Direct writing system

-producer or agent is an employee of the insurer. - insurer owns the accounts. - agent may be paid a salary, salary plus bonus or commission.

A _______________________ insurance company is owned by its policyholders.

A. Stock B. Reciprocal C. Fraternal Benefits Society D. Mutual- Answer

Career agency system

Agents are recruited , trained and supervised by either a managing employee or general agent who is contracted with the insurance company.

Types of Reinsurance

- Treaty agreements- Reinsurance agreement that covers all risks contained in the subject line of business automatically. - Facultative Agreement- Reinsurance agreement that allows a ceding and reinsurance companies the opportunity to negotiate coverage for individual risks.

Independent Agency

- agent or agency enters into agreements with more than one insurer. - agency retains ownership of the business written. - they are paid a commission and covers the cost of the agency operations.

Exclusive or captive agent

- deals with insured trough an exclusive or captive agent. - agent represents one company or group of companies having common ownership. - insurer retains ownership rights to the business written by the agent. - agent is an employee or a commissioned independent contractor. - Insurer may or may not provide office and agency support services.

Personal producing general agent

- does not recruit career agents. - sells insurance for carriers it is contracted with and maintains its own office and staff.

Surplus lines insurance

- finds coverage when coverage cannot be obtained from admitted insurers. - may not be utilized solely to receive lower cost coverage than would be available from an admitted carrier. - each state regulates the procurement of surplus lines insurance in its state. - non-admitted business must be transacted through a surplus lines broker or producer.

Self- Insurer

- Assume the financial risk one self. - large companies who may reinsure for risks above certain limits.

Federal Insurance Office (FIO)

- Established by the Dodd-Frank Wall street Reform and Consumer protection Act. - This office monitors the insurance industry and identifies issues and gaps in the state regulation of insurers. - Monitors access to affordable insurance by traditionally underserved communities and consumers , minorities, and low- and moderate income persons. - The FIO is not a regulator or supervisor. - Insurance is primarily regulated by the individual states.

Insurance producers and company trade associations

- Exist to provide education, support, networking and lobbying for insurance companies and producers.

Risk Retention Groups (RRG)

- Group owned insurer primarily assumes and spreads the liability risk of its members. - Licensed in at least one state and may insure members of the group in other states. - Owned by policyholders. - Made up of large number of homogenous or similar units. - Membership is limited to risks with similar liability exposures such as theme parks, go cart tracks or water slides. - Must have sufficient liquid assets to meet loss obligations. - Each member assumes a portion of the risks insured.

Reciprocal Insurance company

- Group owned insurer whose main activity is risk-sharing. - Unincorporated and is formed by individuals, firms and businesses. - Each subscriber assumes part of the risk of all other subscribers. If premiums collected are insufficient to pay losses and assessment of additional premium can be made. - The exchange of insurance is affected through an attorney-in-fact.

Insurance regulation at the state level

- Insurance industry is primarily regulated at the state level. - The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public. - The judicial branch is responsible for interpreting and determining the constitutionality of the statutes. - The state's executive branch is to enforce the existing statutes. - The commissioner, Director or superintendent of insurance is appointed by the governor and the commissioner has the power to issue rules and regulations to help enforce these statutes.

Insurance regulation at the Federal level

- McCarran-Ferguson Act of 1945 determined that the federal government can not regulate insurance in areas which states have the authority to do so. Congress created federal agencies to provide regulatory oversight impacting insurance practices. Government insurers step in as a last resort when private insurers are unable to provide protection relative to the catastrophic nature or unpredictability of a risk.

Private vs Government insurers

- Most insurance is written through private carriers. - Governmental based insurers step in as a last resort to offer an insurance alternative when private insurers are unable to provide protection. -

Stock Insurance Company

- Owned by stockholders or shareholders - directors and officers direct the company operations and are elected by the stockholders. - Stockholders receive taxable corporate dividends as a return of profit when declared by the directors. - Dividends are not guaranteed. - Traditionally, stock insurers issue non-participating policies.

Residual Markets

- Private coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers. - A joint underwriting association or joint reinsurance pool requires insurers writing specific coverage lines in a given state to assume the profits/losses accruing their share of the total voluntary market premium written in that state. - Risk Sharing plan- Insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels. - Coverage is written as workers' compensation, personal auto liability or property insurance on real property.

Fraternal Benefit Societies

- Social organizations that engage in charitable and benevolent activities that provide life and health insurance to their members. - Membership consists of faith, lodge order or society. - non-profit

Foreign insurer

Insurer not organized under the laws of this state, but in one of the other states or jurisdictions within the US whether or not it is admitted to do business in the state or jurisdiction.

Alien Insurer

Insurer organized under the laws of any jurisdiction outside of the US whether or not it is admitted to do business in this state.

Insurer management and distribution

Management: - executives- oversees the operation of the business. - actuarial department- gather and interpret statistical information used in rate making. An actuary determines the probability of loss and sets premium rates. - Underwriting department- responsible for the selection of risk and rating that determines actual policy premium. - Marketing/sales department- advertising and selling - Claims- assists in the event of a loss.

Direct mail or direct response company

sells insurance policies directly to the public with licensed employees or contractors. - a marketing system utilizing direct mail, newspapers, magazines, radio, television, internet, web sites, call centers and vending machines.

Admitted vs non-admitted

Refers to whether or not an insurer is approved or authorized to write business in this state. - Domicile doesn't impact whether or not an insurer may be admitted to do business in this state.

If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which of the following types of insurance?

Reinsurance

Mass marketing

used to target a specific type of insurance to a large group of individual, such as the American association of retired people aarp. - reduces marketing and underwriting experiences.

Admitted (authorized) insurer

authorized by this state's commissioner of insurance to do business in this state. - received a certificate of authority to do business in this state.

Domestic insurer

insurer organized under the laws of this state, whether or not it is admitted to do business in this state.