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Overview of Insurance Operations
Insurance Regulation
Insurance Marketing and Distribution
The Underwriting Function
Risk Control and Premium Auditing
100

These are the two major types of insurers within the legal form of ownership classification.

What are Proprietary and Cooperative? Proprietaries are owned by their policyholders; includes stock, Lloyds and insurance exchanges. Cooperative includes mutual companies, reciprocals fraternal organizations and cooperatives.

100
This is the act that protects consumers and insurers from insolvency as a result of fraud.
What is the Insurance Fraud Protection Act. This protects anyone with a felony conviction from working in insurance without written consent of an insurance regulator. It also makes it illegal for insurers to employ someone with a felony conviction involving dishonesty or breach of trust.
100
This is an authorized agent of a primary insurer that manages all or part of the insurer's activities, usually in a geohgraphic area
What is a Managing Genral Agent or MGA? Also called MGU (Managing General Underwriters) ADvantages of using this include low fixed cost, specialty expertise and assumption of insurer activities.
100
This is the percentage that indicates that the premium to surplus ratio is considered too high.
What is 300% or 3-1?
100
This is NOT a reason that insurers conduct risk control activities: - Earn a profit - To reduce operating expenses - Meet customer needs - Fulfill duty to society - To Comply with legal requirements
What is To reduce expenses.
200

These are the major goals of an insurer.

What is: Earn a profit; meet customer needs; comply with legal requirements; diversify risk; fulfill duty to society?


200
This act makes insurers subject to federal employment laws just like any other business.
What is The McCarran Act? This act also makes stock insurers subject to regulations just like any other such business.
200
This is the only activity listed that is NOT a primary function of insurers: Prospecting, policy issuance, regulation, sales, customer service, claim handling and consulting
What is regulation?
200
This is a guide to individual and aggregate policy selection that supports an insurer's mission statement
What is underwriting policy? Also referred to as underwriting philosophy
200
This is the primary reason for premium auditing.
What is: to determine the correct premium for the policy period? Another important reason is to provide the insurer with accurate information to determine whether the renewal premium estimate is in line with the audited exposures.
300

These are the three types of distribution systems and five types of distribution channels.

What are independent agency, direct writer marketing system and exclusive agency? The distribution channels are internet, financial institutions, internet, call centers, direct response.

300
This is a fund that mitigates the effects of insurer insolvency
What is a guaranty fund? This is a state established fund that provides a system for the payment of some of the unpaid claims of insolvent insurers licensed in that state. THis is funded by assessments collected by all insurers licensed in that state
300
An insurer usually selects THIS before it begins writing business.
What is a distribution system?
300
This is the accounting system that evolved to satisfy insurance regulations.
What is SAP or Statutory Accounting Principles? Most other businesses use Generally Accepted Accounting Principles, or GAAP, which focuses on the organization as an ongoing enterprise for financial reporting.
300
THis is the final step in the premium auditing process.
What is Reporting?
400

These are the three core functions of insurers.

What are marketing, claims and underwriting? Also know that the supporting functions are: risk control, premium auditing, actuarial, reinsurance, IT

400
This is the entity that coordinates regulatory activities among states insurance departments
What is the NAIC? The NAIC has no regulatory authority but provides a forum to develop uniform policy
400
A customer who requires a high limit of insurance, needs unusual or broad coverage, has an unusual or unique loss exposure, or unfavorable loss exposure will be placed with a non admitted insurer by using this type of distribution system.
What is a surplus lines broker?
400
An example of this underwriting tool is using GPS tracking devices to analyze driver's behaviors
What is telematics? Other underwriting evaluation tools are predictive analytics, predictive modeling, CAT modeling.
400
This is the function of an insurer which is most directly impacted by premium auditing.
What is Underwriting? It also affects Claims, Marketing, Sales and Risk Control.
500

This is used to calculate the profitability of an insurer.

What is the Combined Ratio? Combined Ratio= Incurred losses/Earned Premiums + Incurred Expenses/Written Premiums

500
THis is the only one of the following that is NOT a major goal of rate regulation: - To ensure rates are adequate - To ensure rates are not excessive - To ensure rates are not unfairly discriminatory - To ensure rates are consistent for every type of risk
What are licensing insurers and producers, approving policy forms, holding rate hearings, rate filings, evaluating solvency information, performing market conduct exams,investigate policyholder complaints, rehabilitating or liquidating insolvent insurers, issuing cease and desist orders, fining insurers who break the law, publishing shoppers guides, preventing fraud
500
THIS is the insurer's information portal to insurance customers.
What is Marketing? Through research, development, collecting information, planning, product development, advertising, PR, amd sales fulfillment, an insurer learns enough about their customers to make decisions about customer needs to address.
500
These are two ways that insurers can calculate ROE (return on equity)
What is Net Income/avg policyholder Surplus (SAP) - AND- Net Income/Avg Owner's Equity Stock insurers calculate both of these ratios.
500
Ratemaking data is collected including premium volume, loss experience, and total insured exposure units for each rating class, which calculates loss costs used to establish rates. This must be filed with ___________.
Who are state regulators? This is to support rate increases or other rate filings.