Aflac 1
What Criteria do you look at while evaluating risks
Age, gender, occupation, health, money, location
Indemnity
Also known as a reimbursement, states that in a event of loss, a beneficiary will collect those losses.
morale hazards
Arise from a state of mind that's indifferent from loss like careless
Implied authority
Assumed things agents need to do, not stated in contract but common sense in order to transact buisness
What type of insurance is predetermined blanket agreement
Automatic (treaty) insurance
What makes competent parties
Both are understanding what's happening, not high or drunk
Legally binding contact must have 4 things
Both parties to consider (CONSIDERATION) the offer, to AGREE to the offer, both are COMPETENT and understanding what's happening, and there's a LEGAL PURPOSE
How can insurance companies avoid adverse selection
By refusing or restricting coverage for bad risks or charging more money on their policies
Risk
Chance that a loss will occur
Hazards
Conditions or situations that increase the probability of an insured loss occurring.
Binding force in any contract is what?
Consideration.
Which of the following is not an essential element in an insurance contract
Counteroffer
Not all risks are insurable. Certain characteristics must be present for a particular risk to be considered an insurable
Due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected on large exposure
What are two types of reinsurance agreements
Facultative and automatic
social insurance programs
Federal and state governments provide insurance in the areas where private insurance is not available
As a number of purple in a risk pool increases...
Future losses become more predictable
Fraud
INTENTIONALLY misrepresentation of an existing, important fact
A life insurance policy has legal purpose if what two things exist
Insurable Interest consent
What do individuals use to transfer their risk of loss to a larger group?
Insurance
Reciprocals
Insurance companies made up of subscribers who are known as reciprocal insurance company or exchange
Concealment
Intentional failure to disclose material underwriting facts that should have been disclosed; grounds for policy rescission. Hiding something sneaky
reciprocal
Interchange of reciprocal agreements of indemnity
Insurer's Consideration
Is the promise to pay for losses
homogeneous
Large number of units having the same exposure to loss
domicille
Location where the insurer is located, not necessarily where the insurer conducts business
Who loves Ali
MIRANDA yummy yummy Ali
Unilateral
One side is making a promise
Llyod's Associations
Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk. NOT AN INSURANCE COMPANY
Mutual Companies
Owned by the policy owners and issue participating policies.nontaxable
Insured's Consideration
Premium and statement in an application
Estoppel
Prevents the denial of a fact, if the fact was admitted to be true previously.
Whats the difference between private insurance and government insurance?
Private insurance is funded by premiums, Government insurance is funded by taxes.
Hazards Increase what?
Probability of loss
Insurance means to...
Provide a means for transfer loss
In a case of loss, the indemnity provision in insurance policies
Restores an insured person to the same financial state as before the loss
Events in which a person has both the chance of winning or losing are classified as
Speculative risk
Express Authority
Stated in agents contract
Apparent Authority
The assumption an agent has authority to work or sell for a certain buisness. For example if you see someone on the streets downtown in slutty outfits you would assume they are a prostitute. If I see you holding Bank of America cards I'll assume you work on behalf of them.
Insurance agents represent who?
The insurer, also known as the principal
Ceding Insurer
The originating company that procures insurance on itself from another insurer
moral hazards
They lie on an application, fraudulent claims
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
Due to chance
a loss that is outside the insured's control
Physical Hazard
a physical condition that increases the frequency or severity of loss
Contract
agreement between two or more parties that can be enforced by law
perils
causes of loss insured against in an insurance policy
Non participating policies
does not pay dividend to the policy owner however taxable dividends are paid to stockholders
What are insurable risks?
due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected and large exposure.
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
indemnity
Contract of Adhesion
the insured must accept the entire contract with all of its terms and conditions
Facultative Reinsurance
when reinsurance is purchased on a specific policy
Reinsurance
A contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities.
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.
Definite and measurable
A loss that is specific as to the cause, time, place and amount. An insurer must be able to determine how much the benefit will be and when it becomes payable.
Sharing
A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
Personal contract
An agreement between an insurance company and an individual that states that insurance policies cover the individual's insurable interest.
In insurance, an offer is usually made when
An applicant submits an application to the insurer
Foreign Insurer
An insurance company that is incorporated in another state.
Alien Insurer
An insurance company that is incorporated outside the United States.
Domestic Insurer
An insurer doing business in the jurisdiction in which it is incorporated.
Stock Insurer
An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders.
What are the methods to handling risks
Avoidance, Retention, Sharing, Reduction, Transfer
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is what?
Avoidance- If you avoid something you're not exposing yourself too it.
What is the most common method of transferring risk
Insurance, because it takes the financial burden away
statistically predictable
Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.
Insurance is a contact by which one seeks to protect another from?
Loss
Fraternal Benefit Societies
Must be nonprofit, have a lodge system, and offer insurance to its members only
Upmost good faith
No fraud, concealment, nothing. The insurer must clearly describe everything in the policy and not mislead
Adhesion
Only one party (insurer) prepares a contact and the other party accepts it as is.
The cause of a loss is what?
Peril
Retention
Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.
Which type of insurance is based on mutual agreements among subscribers
Reciprocal insurance
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Randomly selected and large loss exposure
There must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location.
For insurance purposes, representations are what on insurance applications
They are answers that are best true answered. Because representations are true
When reinsurers use facultative reinsurance they do what to each application
They underwrite each application separately
What's the purpose of reinsurance
To protect insurers against catastrophic losses
What are the three purposes of Retention?
To reduce expenses and improve cash flow, more control of claim reserving, fund for losses that can not be returned.
What is the most effective way to handle a risk
To transfer it so that the loss is borne to another party
Representations are statements believed to be true or false
True
Aleatory Contract
Unequal exchanges because payment of benefits is contingent upon the occurrence of an uncertain loss.
The insurer must be able to rely on the statements in the application and the insured must be able to rely on the insurer to pay valid claims. I'm the forming of an insurance contract this is what?
Upmost good faith. If you were the enrolling, you would rely on your agents statements to be true. That's upmost good faith.
A contract without a legal purpose is considered a what
Void, and can not be enforced by any other party
Reinsurance Treaty
When an insurer has an automatic reinsurance agreement between itself and the reinsurer in which the reinsurer is bound to accept all risks ceded to it.
How does acceptance take place
When an insurers underwrite approves the application and issues a policy
How are dividends created
When the premiums and earnings combined exceed the actual cost of coverage creating a surplus
Avoidance
eliminating exposure to a loss
Admitted/authorized users
insurance company that has a certificate of authentication to show you can do business in that state
reciprocol
insurance resulting from an interchange of reciprocal agreements
Adverse Selection
insuring of risks that are more prone to losses than the average risk
Adverse selection
insuring of risks that are more prone to losses than the average risk...Insurance companies avoid these
captive insurer
organized and owned by a cooperation or firm to serve the insurance needs at lower rates
private owernships
ownership, authority to transact business, location, marketing, and rating (financial)
Unilateral Contract
promise in exchange for an act
A reciprocal insurance exchange is what type of agreement
risk sharing agreement
Reduction
taking action to prevent risks. Ect installing smoke detectors, checkups, lifestyle changes
Law of Large Numbers
the larger the number of individuals that are randomly drawn from a population, the more representative the resulting group will be of the entire population
Waiver
the voluntary relinquishment of a known legal right
What does cede mean
to give up
aleatory
unequal