Chapter 1 Life Insurance
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
Larger
What are the types of hazards
Physical, Moral, Morale
Define "Risk Retention"
Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.
When does the applicant apply for an offer
When submitting the application
Who is a competent party?
1) not under the influence 2) of legal age 3) mentally competent to understand the contract
Conditional Contract
A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable.
Mutual insurance company
A type of insurance company owned by its policyholders.
What contract grants express authority to an agent?
Agents contract with the principal
Lloyd's associations
Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk.
Unilateral Contract
The insured is not legally bound to do anything. The insurer, However, must pay losses covered by the policy.
Define indemnity
The insured may only receive benefits for the amount lost.
What is not a characteristic of an insurable risk?
The lost must be catastrophic
Pure Risk and Speculative Risk
The risk of loss may be classified as
What is Pure Risk?
a situation in which a person can only lose or have no change represents.
Reciprocal Insurance Exchange
is a formal risk sharing agreement
adverse selection problem
is that people who have more risk want insurance and people who have less don't want insurance as much.
Apparent Authority
is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. Also known as "Perceived Authority"
Transfer (risk management)
is when a individual purchases insurance. this is a risk management technique.
Aleatory
means there is an exchange of unequal amounts or values. Example premium paid by the insured is small in relation to the amount that will be paid by the insure in the event of a loss.
Homogeneous
Are units with the same or similar exposure to loss
In an insurance policy contract ambiguates are automatically ruled in favor of?
Insured
Commingling
Is when a producer fails to segregate primum monies from his own personal funds.
When does acceptance of an insurance contract occur?
When the insurers underwriter approves coverage.
Alien Insurer
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Personal contract
a policy can not be changed to someone else without written consent of the insurer, nor can the owner transfer the contract to another person without the insurers approval. Exception: Life insurance is an exception to this rule: a Policy owner can transfer or assign ownership to another person. however the insurer must still be notified in writing.
Fraternal benefit society
An organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.
Physical Hazards
Are individual characteristics that increase the chances of the cause of loss. Example Past medical history, condition at birth, blindness
Hazards
are conditions or situations that increase the probability of an insured loss occurring.
Foreign
is when your insurance company is formed under the laws of another state but you are selling in this state.
Risk Retention Goals
1) to reduce expenses and improve cash flow 2) to increase control of claim reserving and claims settlements 3) to fund for losses that cannot be insured
Stock Insurance Company
insurers are owned by stockholders who have the usual rights of ownership, including the right to vote.
Certificate Authority
is a document the insurer must have before selling insurance. this is by state.
Direct Response Marketing
is when the insurance agent is bypassed.
Moral hazards
tendencies towards increased risk. lying on application, submitted fraudulent claims against an insurer
Reasonable Expectations
the reasonable expectations of policyowners and beneficiaries will be honored even though the strict terms of the policy do not support these expectations; what a reasonable and prudent buyer can expect.
What privileges do insurers have that balances the order
the right to determine the wording of a policy
Producer's Fiduciary Duty
the trust that a client places in the producer in regard to handling premiums.
Express Authority
It is the authority that is written in the contract
Market conduct
describes the way companies and producers should conduct their business
Elements of Insurable Risk
due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected and large loss exposure
Morale hazards
Arise from a state of mind that causes indifference to loss, such as carelessness. example wreck less driving. Actions taken without forethought that may cause physical injury.
What type of authority is not stated in a agents contract but is required for the agent to conduct business?
Implied