property and casualty
Open Peril
Term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against "any risk of loss" that is not specifically excluded.
Express Authority
The authority granted to an agent through the agents contract is referred to as the
risk
Uncertainty of loss
merit rating
a bad driving record but no at fault accidents would be an example of what rating
statue
a law passed by legislature
pure risk
a risk that presents the chance of loss but no opportunity for gain
Speculative Risk
a situation in which either profit or loss is possible
Material Representation
a statement by the applicant that, upon, discovery, would affect the underwriting decision of the insurance company
peril
a tornado is an example of
agent
according to the law of agency, a principal is related to an
Insurer
agent/insurer relationship: who is the principal
reinsurance
agreement between a ceding insurer and assuming insurer
conditional
an insurance contract entails that both the insured and insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe
captive agent
an insurance producer who by contract is bound to write insurance for only one company is called
mutual
an insured purchased a policy 5 years ago. last year, she received a dividend check from the company that was not taxable. This year she did not get a check . From what type of insurer did the insured purchase the policy.
consideration
an insurer neglects to pay a legitimate claim that is covered under the terms of the policy. what has the insurer violated
Express powers
are written into the contract between the insurer and the agent
experience rating
based off of past losses that the individual has experienced
peril
causes of loss insured against in an insurance policy
Unequal values are exchanged between the parties to a contract
contracts are aleatory in nature, what does this mean?
Contracts of Adhesion
contracts that are prepared by one party and submitted to the other party to take it-or leave- it basis are classified as
in the favor of the insured
courts will interpret any ambiguity in an insurance contract in the favor of
actual cash value
current replacement cost- depreciation =?
obsolescence
depreciation when the item gets outdated
retrospective rating
for what rating is a deposit premium needed at the inception of the policy
Reasonable Expectations
if a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of what concept?
apparent authority
if an agent is using stationary with the logo of an insurance company , applicants for insurance assume that the agent is authorized to transact on the behalf of that insurer.
authorized or admitted
if an insurer holds a certificate of authority , it is known as what type of insurer
unilateral
if only one party of the contract has made a promise then what kind of contract is it?
when the application is submitted
in insurance contracts, when is the offter usually made
unilateral
in insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
at the time of the loss
in property and casualty insurance when should the insurable interest exist?
merit
in this method of rating the insureds premium is based on other factors that that indicate the probability that loss will occur
pure risk
in which a person can only lose or have no change
risk reduction
installing deadbolt locks in a home is an example of
Lloyd's Association
insurance provided by individual underwriters not companies
retrospective rating
is a self-rating plan under which the actual losses during the policy period determine the final premium, subject to a minimum and maximum premium
Named Peril
is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that lists specific covered perils. No coverage is provided for unlisted perils.
speculative
like gambling
not taxable since the IRS treats them as a return of a portion of the premium paid
on a participating insurance policy issued by a mutual insurance company, dividends paid to the policy holders are
Unilateral Contract
one sided; only one party makes a promise
unilateral contract
one sided; only one party makes a promise
direct loss
property insurance only covers what type of loss
class rating (manual rating)
refers to the practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics
indemnity
reimbursement
underwriting
risk selection process
adverse selection
risks with higher probability of loss seeking insurance more often than other risks
risk reduction
steps taken to prevent loss are
Concealment
term best describes the act of withholding material information that would be crucial to the underwriting process
Reciprocal Insurance Exchange
the chief administrative of the insurer is called "an- attorney-of fact" of what
inception
the date that the policy goes into effect
certificate of authority
the document that indicates that an insurer has been approved and is authorized to transact insurance in a particular state is known as
Contracts of Adhesion
the insured does not have any input into the contract but simply adheres to the contract
earned premium
the portion of premium paid in advance that now belongs to the insurer for providing coverage for a specified period of time
Idemnify
to restore an insured to the same financial status from before loss
aleatory
uneven exchange of values
Material Misrepresentation
untrue statements on the application unintentionally made by insureds, that if discovered, would alter the underwriting decision of the insurance company are called
exposure units
used as a measure of rating units or the premium base of risk
schedule ratings
used by applying a schedule of charges and credits to some base rate to determine the appropriate rate for the individual
judgement ratings
used when credible statistics are lacking or super varied
physical, morale, and moral
what are 3 types of hazards
domestic, foreign, alien
what are 3 types of insurers
agreement, consideration, contractual capacity, legality
what are the 4 elements of an insurance contract
*Due to chance *Definite and measurable *Statistically Predictable *Not catastrophic *Randomly selected/ large loss exposure
what are the 5 characteristics of an ideally insurable risk
Avoidance, transfer, sharing, retention, and reduction
what are the methods of managing risks
Implied Authority
what authority is NOT in an agents contract but is required for the agent to conduct business
agents contract with the principal
what documentation grants express authority to an agent
Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language
what does the term reasonable expectations mean
risk retention group
what is a liability insurance company that is owned by its members
something of value that each party gives to eachother
what is consideration
a promise to pay in the event of a loss
what is consideration on the part of the insurer
apparent
what is considered "perceived authority'
captive insurer
what is owned by a corporation to serve that organizations needs at lower rates than would otherwise be available for commercial insurance
captive insurer
what is owned by a corporation to serve that organizations needs at lower rates than would otherwise be available with commercial insurance
Consideration
what is the binding force in any contract
reinsurance
what method do insurers do to protect themselves from catastrophic losses
class rating
what rating is most common
merit rating
what rating is most common in personal auto insurance
apparent authority
what type of authority is based on what an agent says or actions
reciprocal
what type of insurance is based on mutual agreements among subscribers
facultative
what type of reinsurance arrangement is negotiated on a case by case basis
certificate of authority
when a commissioner has determined that an insurer has met all of the requirements for transacting insurance in their state, what is issued to the insurer?
insurer
when agents are acting within their scope of practice , their actions will be assumed to be the acts of the
consideration
when an insured makes truthful statements on the application for insurance and pays the required premium , it is known as
indemnity
which insurance principal states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
law of large numbers
which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated
stock companies
who issues nonparticipating policies, in which the policy holders do not share in profits or losses
policy holders
who might receive dividends from a mutual insurer?
direct and inderect
2 types of property losses
class and individual
2 types of rates are
Financial, blood, and business
3 elements of insurable risk are
1.judgement 2.schedule 3.experience rating 4.retorspective 5.merit
5 basic individual rate- making approaches
Depreciation
A decrease or loss in value
Estoppel
A legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived.
Specific Insurance
A property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.
Loss Costs
A rating method developed by ISO that provides an insurer with that portion of a rate that does not include provisions of expenses or profit and are based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time
Blanket Insurance
A single property insurance policy that provides coverage for multiple classes of property at one location, or provides coverage for one or more classes of property at multiple locations.
warranty
An absolutely true statement upon which the validity of the insurance contract is based
unilateral contract
In what contract is the insured not legally bound to do anything but the insurer pays the loss
