Basic Terms
This is defined as a condition where there is a chance of a potential loss
risk
This is the cause of a loss.
peril.
This means assuming reasonability for a loss.
Risk Retention
This is a probability stating that the larger the sample size of units with the same or similar exposures, the greater the accuracy in predicting losses.
Law of Large Numbers
A company owned by its stockholders
Stock Insurance Company
Authirized to transact insurance in a given state and given a certificate of authority
Admitted Insurer
This department gathers and interprets statistical data to determine the probability of a loss
Actuarial Department
The goal of this person is to select risks whose future losses fall into the normal range category
Underwriter
These types of rates must be filed with the state and may be used as soon as they are filed.
File and Use
This defines the relationship between an insurance company known as the principal and a producer (Agent)
Law of Agency
What are agents responsible for doing?
Soliciting, negotiating, selling, and cancelling insirance policies with the insurer.
According to the Graham-Leach-Biley Act notice of information practices need to be provided when?
At the time of the customer relationship and annually after.
This type of risk will result in a loss or no change in status and there is no possibility for gain.
pure risk
This is a specific condition that increases the likelihood that a loss will occur from a peril
Hazard
This means distributing or pooling a risk among several risk takers with similar loss exposure.
Risk Sharing
The idea that people will seek insurance more frequently for risks that are hard to insure.
Adverse Selection
Insurance company owned by its policyholders
Mutual Insurance Company
These insurers can insure risks in states even if not admitted as long as coverage cannot be obtained from an admitted insurer
Surplus Lines Insurer
They oversee the operation of the business
Executives
This means the applicant is able to meet the insurer's underwriting requirements
An insurance company changes rates but must file new rates with insurance commission within a specific timeframe.
Use and File
If an agent / producer exceeds their authority, they are held what for their actions?
Personally Liable
An agent has this responsibility when handling insurer funds in a trust capacity
Fiduciary
If there is an adverse action taken by the insurance company it is not finalized until when?
The investigation is over.
This type of risk may result in a loss, a gain, or no change in status.
speculative risk
Physical condition that increases the probability of a loss often seen, heard, felt, tasted or smelled.
Physical Hazard
This is shifting risk to another party.
Risk Transfer
This is the insurance for insurers
Reinsurance
Groups and associations with specific underwriting needs
Self Insurers
These insurers cannot do business on risks on a given state
Non-Admitted Insurers
A dollar amount charged for a particular unit of insurance
Rate
These are the elements of an insurable risk
Homogeneous units, statistically calculable, loss accidental or chance, loss measurable, cause a financial hardship, and catastrophic perils excluded.
Underwriting factors that are used to determine the rate
The nature of the risk
What hazards are present
Claim history of applicant
Other factors
This is written into producers contract
Express Authority
Agents have this kind of duty to serve the best interests of the applicants or insured
Ethical duty
The Fair Credit Reporting Act helps with identity theft by allowing an alert to stay in a consumers file for this period.
90 Days
This is defined as a reduction, decrease, or disappearance in value that affects someone's property or financial position.
loss
Dishonest tendencies that increase the likelihood of a loss.
Moral Hazard
This is minimizing the risks we cannot completely avoid
Risk Reduction
Non-Governmental entities that write insurance for profit
Private Insurance
Insurer Organized under laws of the state
Domestic Insurer
This comes from a states department of insurance and allows you to conduct business as either a domestic, foreign, or alien insurer
Certificate of Authority
This department is responsible for selecting risks
Underwriting Department
What catastrophes are excluded from insurance?
War, calamity, and nuclear hazard
This type of rating uses a manual published by an insurer or rating organization.
Manual Rating
This authority is not specifically stated but necessary to do business
Implied Authority
These people act on behalf of the insurance applicant
Broker
The Terrorism Risk Insurance Act allows who to help fund the losses of commercial property and casualty insurance in the event of a terrorist attack
Federal Government
The condition of being at risk for loss.
Loss Exposure
An attitude of indifference toward the risk is this.
Morale Hazard
This is eliminating the risk.
Risk Avoidance
These are last resort coverage sources
Residual Markets
Insurer in another state
Foreign Insurer
This refers to the jurisdiction - state district, territory, or country where an insurer is formed or incorporated
Domicile
The rates for an insurance company are kept here
Rating Manual
Insurers use these to compare to an insured's ability to pay
Educated estimates
This rating uses the actual loss history of policy holder to develop rates.
Merit Rating
This happens when a producer exceeds his or her authority
Apparent Authority
This protects a consumers right to privacy
Fair Credit Reporting Act
Secretary of the Treasury