Ad Banker NY P&C
Independent Agency
- can rep many insurers -retains ownership of accounts -paid a commission
Producer's Responsibility to the Insurance Applicant or Insured
- fwd premiums on a timely basis -seek and gain knowledge of applicants needs -review and evaluate teh apps current insurance coverage limits and risks -serve best interests even if they rep insurer -recomend best coverage
Stock Insurance Company
-owned by stockholders -D&O Direct - taxable corp divs to stockholders -divs not guaranteed - Issue non-participating policies
Four Elements of a Legal Contract
1. Competent Parties (not minors, not DUI) 2. Legal Purpose 3. Agreement (Offer and Acceptance) 4. Consideration (value xchanged)
Hazard
A condition that increases the frequency or severity of a loss.
Valued Contract
A contract that pays a stated amount in the event of a loss (disability insurance/life insurance). MOST ARE NOT VALUED
Self Insurance
A form of risk management whereby a part of the firm's earnings is earmarked as a contingency fund for possible future losse Purchase of reinsurance is available as well
Gramm-Leach-Bliley Act (GLBA)
A law that requires banks and financial institutions to alert customers of their policies and practices in disclosing customer information.
Risk Retention Group
A liability insurance company owned by its members, which are exposed to similar liability risks by virtue of being in the same business or industry. Each member asummes a portion of the risk
Producer (Agent)
A person or agency appointed by an insurance company to represent it and to present policies on its behalf.
endorsement
A policy form that alters or adds to the provisions of a property and casualty insurance contract.
Residual Markets
A private coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers.
Parol Evidence Rule
A written contract may not be altered without the written consent of both parties.
Fair Credit Reporting Act
Act that protects privacy of background information and ensures that information supplied is accurate applicant has right to revewi and challenge report and agency must investiagte within 6 months of challenge. insurer is not responsible for this
Career Agency System
Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company.
Indemnity Contract
An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs.
Adverse Selection
An imbalance created when risks that are more prone to losses than the average (standard) risk are the only risks seeking insurance within a specific marketplaceAn imbalance created when risks that are more prone to losses than the average (standard) risk are the only risks seeking insurance within a specific marketplace
Admitted (Authorized) Insurer
An insurance company authorized and licensed to transact business in a particular state.
Foreign Insurer
An insurance company that is incorporated in another state.
Non-Admitted (Unauthorized) Insurer
An insurer that has not sought approval (or) has not been able to obtain approval to transact business from the insurance regulator in this state.
Apparent Authority
Authority created when a producer exceeds expressed authority, and the insurer does nothing to counter it.
Merchant Marine Act of 1920 (the Jones Act)
Because workers' compensation laws do not apply to seamen, the Jones Act allows insured seamen to make claims for injuries suffered during the course of employment. It also regulates maritime commerce in U.S. waters, transportation of cargo, and the rights of seamen.
Contract of Utmost Good Faith
Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive has been made.
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions.
Estoppel
Cannot deny a fact that was previously admitted to be true
Speculative Risk
Chance of loss no loss or gain
Motor Carrier Regulatory and Modernization Act (the Motor Carrier Act of 1980)
Deregulated trucking have to show evidence of financial via bond guarantee or qualification as self insurer
Personal Producing General Agent
Does not recruit career agents. Sells insurance for carriers it is contracted with and maintains its own office and staff.
FIO
Established by Dodd Frank -monitors insurance industry -underserved and under insured communities
insurance company management
Execs Acturaial UW Marketing/Sales Claims
Producer's Responsibilities to the Insurer
Fiduciary duty to the insurer in all respects, especially when handling premium funds. Must keep premium funds in a trust account separate from other funds and forward to insurer promptly. Must report any material facts that may affect underwriting. Responsible for soliciting, negotiating, selling, and cancelling the insurance policies with the insurer. Duty to only recommend the purchase of suitable policies.
Surplus (excess) Lines Insurance
Finds coverage when insurance cannot be obtained through admitted carriers. It can be placed with non-admitted carriers. Regulated by each state and must be done through Surplus Lines Brokers/Producers
Financial Anti-Terrorism Act (USA Patriot Act)
Imposes record keeping and government reporting requirements on banks, financial institutions and non-financial businesses for specific financial transactions and customer financial records
Domestic Insurer
In state
Reinsurance Companies
Insurers (ceding company) transfer of risk to other insurers (reinsurance insurer) assumes all or portion of the risk from primary or ceding insurer
Fraud
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right. 5 elements 1)False statements that pertains to material fact 2) Disregard for victim 3)victim makes deciisdion acts upon or relies on false statement 4) Decision or action results in harm
Insurable Risk
Large number of homogenous units or groups with the same perils chance of risk is calculable loss is measurable premium is affordable loss is accidental
Fraternal Benefit Societies
Life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.
Private vs. Government Insurers
Most insurance is private Gov can step in to offer alternative where insurance is too cat or underprovided by the markets
NAIC
National Association of Insurance Commissioners -research -promotes uniformity -no legal authority
Unilateral Contract
Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.
personal contract
Owner cannot transfer or assign ownership of an insurance policy (property and casualty) to another person.
Non-Personal Contract
Owner may transfer or assign ownership of a life or health insurance policy to another person.
Physical/Moral/Morale Hazards
Physical condition increase chance of loss Dishonesty that increases chance of loss Attitude that increase chance 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.
Risk Management
Sharing Transfer Avoidance Reduction Retention
Insurance Regulation
State Level Leg writes and passes laws Commissioner appointed or elected by governer will establish rules and regulations to promote the enforcement of relates laws
Warranties
Statements made by the applicant guaranteed to be true - if discovered untrue coverage is voided
Representations
Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true. CAN be withdrawn
attained age
The age of the insured at a determined date.
effective date
The date when an insurance policy begins (also known as the inception date).
lapse date
The date when insurance coverage ends; if not cancelled prior, policy will terminate by end of grace period if premium is not paid.
Aleatory Contract
The exchange of value is unequal. (loss or no loss this is always true)
issue age
The individual's age when a policy is issued.
Principle of Indemnity
The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured.
Reasonable Expectations
The reasonable expectations of policy owners or beneficiaries will be honored even though the strict terms of the policy do not support these expectations
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Tort Law
Torts are civil wrongs; they're not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party.
Hold Harmless Agreement
Transfers liability from one party to another
Types of Reinsurance
Treaty Agreements - Reinsurance agreement that covers all risks contained in the subject line(s) of business automatically. Facultative Agreements - Reinsurance agreement that allows ceding and reinsurance companies the opportunity to negotiate coverage for individual risks.
Risk
Uncertainty concerning the occurrence / chance of a loss
Waiver
Voluntary surrender of a known right claim or privilege
Misrepresentations
a false statement in the application that can render the contract void if material to acceptance of the risk (does not reflect the truth).
broker
a licensed individual negotiates contracts on behalf of the applicant reps applicant
Pure Risk
a risk that presents the chance of loss but no opportunity for gain (INSURABLE)
Law of Agency
agent or producer acts on behalf of the other party (principal) insurer
Applicant
applying for insurance
Producer Implied Authority
authority public assumes agent has prov quotes accepting premium completing apps
Producer Express Authority
authority written into contract
Peril
cause of loss
Exposure
condition of being at risk for a loss
Financial Rating Services
evaluate and rate the financial stability of insurance companies ratings are public
McCarran-Ferguson Act (1945)
federal government cannot regulate insurance (unless cat, there is still oversight)
Violent Crime Control and Law Enforcement Act of 1994
felony to engage in insurance if convicted at state or federal level of dishonesty or breach of trust
Contract LAw
formation and enforcement of contracts
Fraud and False Statements (Fraudulent Insurance Act)
fraud = false statement or deceit anyone engaged in business of insurance who is caught - no more than 50k and no more than 10 years prison or both - 15 years if insurer loses soundness becuase of it -if embezzled or stole does not exceed 5k than 50K and max 1 year or both threats = 50k 10 year felony involving breach of trust 50k 5 year
Lloyds of London
group of underwriters "Syndicates" building and clerical work is shared syndicate manager is AIF`
Reciprocal Insurance Company
group owned for risk sharing unincorporated each sub assumed part of risk Attorney in Fact manages exchange
Insurance Agencies
independent organizations that recruit, contract with, and support sales agents and producers
Contract of Adhesion
insurer prepares and presents on a take it or leave it bais
Insurance Agents or Producers
licensed individuals representing an insurance company when transacting insurance
Insurers
manufacture and sell insurance coverage by way of insurance policies or contracts
Insurability
meet UW reqs
Alien Insurer
non - US
Void Contract
o An agreement without legal effect because it was made illegally or it was declared void by the courts because it doesn't contain all the elements of a legal contract
Insurable event
o Event that may cause loss damage or liability
insurance contract
o Legal contract purchased to indemnify against loss/damage/liability arising from unexpected event o Exchange of premium for larger risk
Mutual Insurance Company
owned by policyholders w they elect bopard of trustees non-taxable div of unused prem divs not guaranteed issue participating polices
Assignement
policy owners may assign or transfer the rights of an insurance contract without notifying the insurer
Direct Writing System
producer or agent is employed by insurer insurer owns accounts
insurable interest
something of value that, if lost, would cause you financial harm
Mass Marketing Sysem
target specific group (AARP)
Rescission
termination of policy as if it never existed
Insurer (Principal)
the company who issues an insurance policy authority by which producer must abide responsible for producer when acting in scope of authority
Risk Management
the determination of correct strategies asses potential losses manage risk
Exclusive or Captive Agency System
the insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.
Insured
the person or business for which the insurer assumes the risk
Underwriting
the process of selecting, classifying, and pricing applicants for insurance
Concealment
the willful hiding or obscuring of material facts pertinent to the issuance of insurance concealment results in denial of coverage and may void policy
TRIA and Extensions
· TRIA (and Extensions) o Federal govt shares terror losses with private market o Keeps p&c costs lower o Details Below