Insurance Categories & Functions #1
A: This document lays out key details, like how much an insured is going to pay, what losses are covered and how claim will be settled.
Q: What is the "insurance policy"?
The insurance policy is the contract between the insured and the insurer, which is enforceable at law. (See page 2-5 in the textbook | LO1).
A: These are contractors hired by insurers to assist with losses in remote locations; with complex loss situations; or when there is a high volume of claims received.
Q: What are "independent adjusters"?
An independent adjuster is not a direct employee; but they still represent the insurer, and they handle the claim similarly to staff adjusters. (See page 2-5 in the textbook | LO1).
A: These are the three (3) ways insurers aim to spread risk.
Q: What are:
1. By Volume
2. By Diversity of risk types
3. By Diversity of risk locations
The primary function of insurance is to spread risk, to stay financially stable and profitable. (See page 2-5 in the textbook | LO2).
A: Fire safety, safe driving, theft prevention and hail suppression are all examples of what?
Q: What are "loss prevention activities" of insurance companies.
Loss prevention activities are one of the five (5) secondary functions of insurance. (See page 2-6 in the textbook | LO2).
A: This is also known as "P&C" insurance.
Q: What is "general" insurance?
General insurance is often referred to as "property and casualty" insurance because it includes property insurance and casualty insurance, which is a blanket term used to describe insurance for other than life, fire, or auto. (See page 2-9 in the textbook | LO3).
A: The person who acts as a "go-between" insurers and applicants (insureds).
Q: Who is an "intermediary"?
Intermediaries are your agents or brokers. They assist in bringing the insured and the insurer together in a contractual relationship. (See page 2-5 in the textbook | LO1).
A: This is whereby one party (the insurer) agrees to protect another party (the insured) from financial loss due to specific risks, outlined in a policy.
Q: What is "insurance"?
It lets individuals exchange the uncertainty of a loss for predictable, manageable payments (the premium). See page 2-4 in the textbook | LO1).
A: This happens when insurers write business in different locations.
Q: What is "diversity of locations"?
When insurers insure properties or risks in many places, it helps protect them from disasters that might only hit one area. It is part of how insurers spread risk. (See page 2-5 in the textbook | LO2).
A: These are all types of general insurance.
A: What are:
. Fire
. Home, tenant, condo
. Liability
. Marine
. PAFs (personal article floaters)
. Surety
. Auto
. Crime
. Business Interruption
... and more! See page 2-10 in the textbook | LO3).
A: This is the part of the insurance premium the company has attained because the coverage has already been provided.
Q: What is the "earned" premium?
It's the portion of premium actually exposed to loss. In other words, when someone pays a premium for coverage, not all of it is immediately considered "earned" by the insurer. The portion that’s "exposed to loss" refers to the amount tied to the period during which the insurer is actively providing coverage—and therefore could have to pay out if something goes wrong. (See page 2-8 in the textbook | LO2).
A: These are the differences between life insurance and general (P&C) insurance.
Q: What are:
. Policy Terms - until death v. yearly
. Indemnity - pays once v. multiple claims
. Type of risk - life (death) v. all kinds of risks
(See page 2-9 in the textbook | LO3).
A: Banks approving mortgages when properties are insured; drivers allowed to use their cars because they carry mandatory TPL insurance; developers funding construction projects when contractors carry insurance, are examples of what?
A: What are: the positive effects of insurance?
Insurance gives people and businesses a sense of security and confidence and gives them the freedom to take risks and try new things. (See page 2-12 in the textbook | LO4).
A: What do: Aid to Security, Aid to Credit, Loss Prevention Activities, Sources of Capital and Sources of Employment represent?
Q: What are the five (5) secondary functions of insurance?
These secondary functions of insurance enhance the economy. The primary function of insurance is to spread risk -- the losses of the few are shared by the many. (See page 2-6 in the textbook | LO2).
A: Unearned premium is:
the part of the premium that has not been used or earned; premium representing the unexpired portion of a policy. (See page 2-8 in the textbook | LO2).
A: The insurance industry spans a wide range of roles, making it one of the most diverse fields for career paths across any sector. Name some jobs arising directly from insurance and some that arise indirectly from insurance.
A: What are:
Directly from insurance:
. Accountants, actuaries, adjusters, agents, appraisers, brokers, underwriters, risk managers, etc.
Indirectly from insurance:
. Body shops, contractors, health professionals, lawyers.
The insurance industry is a source of employment for many Canadians and is one of the five (5) secondary functions of insurance. (See page 2-8 in the textbook | LO2).