Term
| What are the four essential elements of a contract? |
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Definition
| Agreement, Capacity to contract, Consideration, Legal purpose |
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Term
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Definition
| A contract that meets all of the requirements to be enforeable |
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Term
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Definition
| Each party must have the legal capacity to make the agreement binding |
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Term
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Definition
| Something of value given by each party to a contract |
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Term
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Definition
| A contract must follow the law and cannot go against public policy |
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Term
| What are the distinguishing characteristics of insurance policies |
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Definition
| Contract of indemnity, contract of utmost good faith, contract involving fortuitous events and the exchange of unequal amounts, contract of adhesion, conditional contract, nontransferable contract |
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Term
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Definition
| The insurance policy is meant to restore a party who has had a loss to the same financial position that party held before the loss occurred. |
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Term
| Contract of utmost good faith |
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Definition
| Both parties to an insurance contract are expected to be ethical in their dealings with each other |
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Term
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Definition
| A policy in which the insurer pays a stated amount in the event of a specified loss (usually a total loss) regardless of the actual value of the loss |
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Term
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Definition
| An intentional failure to disclose a material fact |
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Term
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Definition
| A false statement of a material fact on which a party relies |
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Term
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Definition
| In insurance, a fact that would affect the insurer's decision to provide or maintain insurance or to settle a claim |
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Term
| contract involving fortuitous events and the exchange of unequal amounts |
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Definition
| The premium that the insured pays will likely not equal the losses paid out over the policy period |
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Term
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Definition
| The insured has to "take or leave" an insurance policy. They have no say as to the wording. |
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Term
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Definition
| The parties to the contract only have to perform under certain conditions |
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Term
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Definition
| An insured cannot give the policy to some other party |
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Term
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Definition
| An insurance form that meets the needs of many policyholders and is therefore printed in bulk for future use |
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Term
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Definition
| An insurance form that is drafted according to the terms negotiated between specific insured or group of insureds and the insurer |
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Term
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Definition
| A policy requiring only a single document such as a personal auto policy |
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Term
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Definition
| A policy requiring a combination of documents to include all the agreements between the insured and the insurer |
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Term
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Definition
| A component of a CPP or a monoline policy that contains the policy provisions relating to a particular line of business, such as commercial property or commercial generaly liability; consists of the coverage part's declaration page, one or more coverage forms, applicable endorsements, and in some cases a general provisions form |
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Term
| All CPP policies contain what? |
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Definition
| Policy conditions and declarations |
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Term
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Definition
| An insurance policy information page or pages providing specific details about the insured and the subject of the insurance |
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Term
| Related insurance policy documents |
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Definition
| Application, endorsements, insurer's bylaws relevant statutory terms |
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Term
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Definition
| Documented request for coverage containing information about insured and loss exposures |
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Term
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Definition
| Documents modifying basic policy form |
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Term
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Definition
| Insurer's corporate bylaws often attached to mutual insurer policies |
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Term
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Definition
| incorporation of statute by reference in policy |
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Term
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Definition
| Any phrase or clause in an insurance policy that describes the policy's coverages, exclusions, limits, conditions or other features |
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Term
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Definition
| Unique information on the insured; list of forms included in policy. Outlines who or what is covered and where and when coverage applies |
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Term
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Definition
| Words with special meanings in policy. May limit or expand coverage. |
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Term
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Definition
| Statements containing insurer's promise to make payment. states circumstances under which the insurer agrees to pay |
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Term
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Definition
| Qualifications on promise to make payment. Outlines steps insured needs to take to enforce policy |
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Term
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Definition
| Provisions stating what the insurer will not cover. Eliminates coverage for excluded persons, places, things or actions |
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Term
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Definition
| insurance for property specifically listed on a policy with a limit of liability for each item |
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Term
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Definition
| To pay covered losses, defend the insured from lawsuits, provide other services to the insured |
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Term
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Definition
| To pay premiums, report losses promptly, provide appropriate documentation for losses, cooperate with the insurer, not hinder subrogation |
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Term
| Eliminate coverage for uninsurable loss exposures |
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Definition
| ie war, earthquake or flood |
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Term
| Assist in managing moral hazards |
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Definition
| Prevent insureds from eaggerating or intentionally causing losses for the purpose of collecting insurance proceeds |
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Term
| Assist in managing morale hazards |
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Definition
| Minimize loss exposures arising from carelessness or indifference |
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Term
| Reduce the likelihood of coverage duplications |
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Definition
| Prevent two policies from covering the same things |
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Term
| Eliminate coverages that the typical insured does not need |
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Definition
| Make it so that only insured's who need particular coverage have to pay for it ie owning a motorboat |
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Term
| Eliminate coverages requiring special treatment |
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Definition
| Some coverages need special rating, underwriting and risk control to be covered |
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Term
| Assist in keeping premiums reasonable |
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Definition
| Exclusions allow insurers to decline loss exposures that may otherwise cause a premium to be unacceptable |
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Term
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Definition
| A policy designed to cover property that moves from location to location |
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Term
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Definition
| A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing names perils |
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Term
| Special form or open perils policies |
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Definition
| A policy that provides coverage for any direct loss to property unless the loss is caused by a peril specifically excluded |
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Term
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Definition
| Fire, lightning, winderstorm, hail, aircraft, vehicle damage, riot and civil commotion, explosion, smoke, vandalism, sprinkler leakage, sinkhole collapse and volcanic action |
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Term
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Definition
| Falling objects, weight of snow, ice or sleet; and sudden and accidental leakage of water from a plumbing system |
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Term
| Special form covers what? |
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Definition
| Everything not specifically excluded |
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Term
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Definition
| Coverage for direct and accidental loss or damage to a covered auto caused by collision with another object or by overturn |
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Term
| Other than collision coverage |
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Definition
| coverage for physical damage to a covered auto resulting from any cause of loss except collision or a cause of loss specifically excluded |
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Term
| Specified causes of loss coverage |
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Definition
| Coverage for direct accidental loss caused by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, or loss resulting from the sinking, burning, collision or derailment of a conveyance transporting the covered auto |
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Term
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Definition
| ie losses that would affect many people at the same time such as earthquake and flood. Also inherent vice and latent defect as well as wear and tear and other maintenance perils |
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Term
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Definition
| A reduction in the value of property that results directly and often immediately from damage to that property |
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Term
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Definition
| A loss that arises as a result of damage to property, other than direct loss to the property |
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Term
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Definition
| Expenses in addition to ordinary expenses that an organization incurs to mitigate the effects of a business interruption |
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Term
| Additional living expense |
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Definition
| A coverage in homeowners policies that indemnifies the insured for the additional expenses that are incurred following a covered property loss so that the household can maintain its normal standard of living while the dwelling is being restored |
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Term
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Definition
| A party entitled to share in whatever loss payment an insured receives |
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Term
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Definition
| Tells the insured the maximum amount of money that can be recovered from the insurer after a loss and helps the insurer keep track of their overall obligations |
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Term
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Definition
| Set a value on covered property. ie replacement cost and actual cash value |
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Term
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Definition
| A portion of a covered loss that is not paid by the insured. encourages the insured to try to prevent losses |
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Term
| Insurance to value provision |
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Definition
| A provision in property insurance policies that encourages insureds to purchase an amount of insurance that is equal to or close to the value of the covered property |
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Term
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Definition
| An insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced. |
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Term
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Definition
| Covers all activities or sources of liability that are not specifically excluded |
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Term
| Covered types of injury or damage (liability) |
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Definition
| Bodily injury and property damage for which the insured is legally liable |
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Term
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Definition
| Physical injury to a person including sickness, disease and death |
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Term
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Definition
| Physical injury to, destruction of, or loss of use of tangible property |
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Term
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Definition
| Injury other than bodily injury arising from intentional torts such as libel, slander or invasion of privacy |
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Term
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Definition
| The damages that the insured is legally liable to pay and the cost of defending the insured against the claim |
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Term
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Definition
| A legally binding contract between the parties to a dispute that embodies their agreement, obligates each to fulfill the agreement, and releases both parties from further obligation to one another that relates to the dispute |
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Term
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Definition
| Various expenses the insurer agrees to pay under a liability insurance policy for items such as premiums on bail bonds and appeal bonds, loss of the insured's earnings because of attendance at trials and other reasonable expenses incurred by the insured at the insurer's request |
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Term
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Definition
| Interest that may accrue on damages before judgment has been rendered |
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Term
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Definition
| interest that may accrue on damages after a judgment has been entered in a court and before the money has been paid ie when the decision is appealed and taken to a higher court |
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Term
| Medical payments coverage |
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Definition
| Coverage that pays necessary medical expenses incurred within a specified period by a claimant for a covered injury, regardless of whether the insured was at fault |
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Term
| Occurrence basis coverage |
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Definition
| Coverage that is triggered by the actual happening of bodily injury or property damage during the policy period |
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Term
| Claims-made coverage form |
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Definition
| A coverage form that provides coverage for bodily injury or property damage that is claimed during the policy period |
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Term
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Definition
| The date on or after which bodily injury or property damage must occur in order to be covered |
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Term
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Definition
| The maximum amount an insurer will pay for injury to any one person for a covered loss |
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Term
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Definition
| The maximum amount an insurer will pay for all covered losses during the covered policy period |
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Term
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Definition
| The maximum amount an insurer will pay for all covered losses from a single occurrence regardless of the number of persons injured or the number of parties claiming property damage |
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Term
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Definition
| Separate limits for bodily injury and property damage liability coverage |
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Term
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Definition
| A single limit of liability for the combined total of bodily injury and property damage from any one accident or occurrence |
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Term
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Definition
| Earned premium-(Paid losses+Loss adjustment expenses) |
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Term
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Definition
| The expense that an insurer incrus to investigate, defend and settle claims according to the terms specified in the insurance policy. |
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Term
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Definition
| Losses that have been paid to or on behalf of insureds during a given period |
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Term
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Definition
| The losses that have occurred during a specific period no matter when claims resulting from the losses are paid |
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Term
| Incurred but not reported losses |
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Definition
| Losses that have occurred but have not yet been reported to the insurer |
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Term
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Definition
| Paid losses+Loss reserves |
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Term
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Definition
| Covered losses, acquesition expenses, general expenses and premium taxes, licenses and fees |
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Term
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Definition
| The portion of an organization's profits that is paid to shareholders |
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Term
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Definition
| Investment income-investment expenses |
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Term
| Overall gain or loss from operations= |
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Definition
| net investment gain or loss+netunderwriting gain or loss |
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Term
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Definition
| Shows an insurer's financial position at a particular point in time and includes the insurer's assets, liabilities and policyholders' surplus |
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Term
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Definition
| Types of property both tangible and intangible owned by an entity |
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Term
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Definition
| Assets meeting minimum standards of liquidity that an insurer is allowed to report on its balance sheet in accordance with statutory accounting principles |
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Term
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Definition
| Types of property such as office furniture and equipment that regulators do not allow insurers to show as assets on financial statements because these assets cannot readily be converted to cash at or near their market value |
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Term
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Definition
| Financial obligations, or debts, owed by a company to another entity usually the policyholder in the case of an insurer |
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Term
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Definition
| An estimate of the amount of money the insurer expects to pay in the future for losses that have already occurred and been reported but are not yet settled |
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Term
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Definition
| An insurer liability representing the amount of premiums received from policyholders that are not yet earned |
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Term
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Definition
| Under statutory accounting principles an insurer's total admitted assets minus its total liabilities |
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Term
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Definition
| Shows the insurer's revenues, expenses and net income for a particular period usually one year |
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Term
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Definition
| Incurred losses/Earned premiums |
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Term
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Definition
| Incurred underwriting expenses/written premiums |
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Term
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Definition
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Term
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Definition
| Net investment income/earned premiums |
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Term
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Definition
| Combined ratio-investment income ratio |
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Term
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Definition
| A chance of loss, or no loss but no chance of gain |
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Term
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Definition
| A chance of loss, no loss or gain |
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Term
| Steps of risk management process |
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Definition
1. Identifying loss exposures
2. analyzing loss exposures
3. examining feasibility of risk management techniques
4. Selecting the appropriate risk management techniques
5. Implementing the risk management techniques
6. Monitoring results and revising the risk management program |
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Term
| Ways of identifying loss exposures |
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Definition
| Physical inspection, Loss exposure surveys, Loss history analysis |
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Term
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Definition
| Avoidance, loss prevention, loss reduction, separation, duplication |
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Term
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Definition
| A risk control technique that involves ceasing or never undertaking an activity so that the possibility of a futre loss occurring from that activity is eliminated |
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Term
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Definition
| Seeks to lower the frequency of losses from a particular loss exposure |
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Term
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Definition
| Seeks to lower the severity of losses from a particular loss exposure system |
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Term
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Definition
| Isolates loss exposures from one another to minimize the adverse effect of a single loss |
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Term
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Definition
| Uses backups, spares or copies of critical property, information or capabilities and keeps them in reserve |
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Term
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Definition
| A risk financing technique by which losses are paid for by generating funds within the organization to pay for the loss |
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Term
| Noninsurance risk transfer |
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Definition
| A risk financing technique in which one party transfers the potential financial consequences of a particular loss exposure to another party that is not an insurer |
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Term
| The five guidelines for selecting risk management techniques |
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Definition
1. Do not retain more than you can afford to lose
2. Do not retain large exposures to save a little premium
3. Exposures with the potential of low frequency but high severity should be insured
4. Do not spend a lot of money for a little protection
5. do not consider insurance a substitute for risk control |
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Term
| The four steps of implementing risk management techniques |
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Definition
1. Decide what should be done
2. Decide who should be responsible
3. Communicate the risk management information
4. Allocate the costs of the risk management program |
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Term
| Assets exposed to property loss |
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Definition
| Types of property that may be exposed to los, damage or destruction |
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Term
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Definition
| Those that may result in property being lost, damaged or destroyed |
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Term
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Definition
| These consequences that may result from property loss. A property loss can be the cause of a net income loss; however, that is considered a separate loss exposure |
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Term
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Definition
| Any personal property affixed to real property in such a way as to become part of the real property |
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Term
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Definition
| Currency, coins, bank notes and sometimes traveler's checks, credit card slips, and money orders held for sale to the public |
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Term
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Definition
| Written instruments representing either money or other property such as stocks and bonds |
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Term
| Why are money and securities difficult to insure |
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Definition
| They can be easily stolen and quickly destroyed in the event of a fire |
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Term
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Definition
| As defined in commercial general liability and auto forms, a land motor vehicle, trailer or semitrailer designed for travel on public roads, including attached machinery or equipment or any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged |
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Term
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Definition
| Various types of vehicles designed for use principally off public roads such as bulldozers and craines |
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Term
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Definition
| A vehicle used for sports and recreational activities such as a dune buggy, all-terrain vehicle or dirt bike |
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Term
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Definition
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Term
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Definition
| Anything that increases the frequency or the severity of a loss |
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Term
| Parties affected by property loss |
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Definition
| Property owners, Secured lenders, Property holders |
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Term
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Definition
| A lender in a mortgage arrangement such as a bank or another financing institution |
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Term
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Definition
| The person or organization that borrows money from a morgagee to finance the purchase of real property |
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Term
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Definition
| The party temporarily possessing the personal property in a bailment ie a dry cleaners |
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Term
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Definition
| The legally enforceable obligation of a person or an organization to pay a sum of money to another person or organization |
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Term
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Definition
| The constitution itself and all the decisions of the supreme court that involve the Constitution |
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Term
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Definition
| The formal laws or statutes enacted by federal, state or local legislative bodies |
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Term
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Definition
| Laws that develop out of court decisions in particular cases and establish precendents for future cases |
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Term
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Definition
| The branch of law that imposes penalties for wrongs against society |
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Term
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Definition
| A classification of law that applies to legal matters not goverened by criminal law and that protects rights and provides remedies for breaches of duties owed to other |
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Term
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Definition
| A wrongful act or an omission, other than a crime or breach of contract that invades a legally protected right |
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Term
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Definition
| The branch of civil law that deals with civil wrongs other than breaches of contract |
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Term
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Definition
| Negligence, Intentional torts, Strict liability |
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Term
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Definition
| The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others |
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Term
| Elements required to prove negligence |
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Definition
1. The defendant owed a legal duty of care to the plaintiff
2. The defendant breached the duty of care owed to the plaintiff
3. the defendant's negligent act was the proximate cause of the plaintiff's injury or damage
4. The plaintiff suffered actual injury or damage |
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Term
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Definition
| A cause that, in a natural and oncinuous sequence unbroken by any new and independent cause produces an event and without which the even would not have happened |
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Term
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Definition
| A person or organization that has committed a tort |
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Term
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Definition
| A legal responsibility that occurs when one party is held liable for the actions of a subordinate or associate because of the relationship between the two parties. |
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Term
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Definition
| A tort committed by a person who foresees that his or her act will harm another person |
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Term
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Definition
| The threat of force against another person that creates a well-founded fear of imminent harmful or offensive contact |
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Term
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Definition
| Intentional harmful or offensive physical contact with another person without legal justification |
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Term
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Definition
| A false written or oral statement that harms another's reputation |
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Term
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Definition
| A defamatory statement expressed by speech |
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Term
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Definition
| A defamatory statement expressed in a writing |
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Term
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Definition
| The seizure or forcible restraint of a person without legal authority |
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Term
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Definition
| An encroachment on another person's right to be left alone |
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Term
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Definition
| Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal or inappropriate |
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Term
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Definition
| A contractual provision that obligates one of the parties to assume the legal liability of another party |
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Term
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Definition
| A written or oral statement in a contract that certain facts are true |
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Term
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Definition
| A legal liability imposed by a specific statute or law ie "no fault" laws |
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Term
| Assets exposed to liability losses |
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Definition
| Most frequently, the plaintiff claims money |
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Term
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Definition
| Autos, watercraft, premises, personal activities, business operations, completed operations, products, advertising, pollution, liquor, professional activities |
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Term
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Definition
| ie someone slipping on an icy front porch |
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Term
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Definition
| ie hitting somebody with a golf ball while golfing |
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Term
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Definition
| ie a plumbing contractor flooding a home on accident |
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Term
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Definition
| ie negligence on the part of the contractor who installed a new furnace that led to a natural gas explosion |
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Term
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Definition
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Term
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Definition
| ie the BP oil spill in the Gulf |
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Term
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Definition
| ie someone who drives drunk after drinking at a bar |
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Term
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Definition
| ie malpractice by a physician |
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Term
| Financial consequences of a liability loss |
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Definition
| Damages, Defense costs, damage to reputation |
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Term
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Definition
| A condition that presents the possibility of loss caused by a person's death, disability, retirement or resignation that deprives an organization of the person's special skill or knowledge that the organization cannot readily replace |
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Term
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Definition
| An employee whose loss to a firm through death or disability before retirement would have economic effects on the company |
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Term
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Definition
| Death, disbability, resignation, layoffs, firing, retirement, kidnapping |
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Term
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Definition
| The inability (because of impairment) of a person to meet his or her personal, social or occupational demands; other activities of daily living; or statutory or other legal requirements |
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Term
| Financial consequences of personnel losses |
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Definition
| Loss of the value the employee contributed to the organization, replacement cost, losses to the organization's value caused by negative publicity, losses caused by low morale |
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Term
| Assets exposed to net income loss |
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Definition
| the future stream of net income of the individual or organization |
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Term
| characteristics of an ideally insurable loss exposure |
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Definition
1. pure risk
2. fortuitous losses
3. definite and measurable
4. Large number of similar exposure units
5. Independent and not catastrophic
6. affordable |
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Term
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Definition
| Loss or no loss but no chance of gain |
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Term
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Definition
| Occuring by chance from the insured's perspective |
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Term
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Definition
| there should be a definite time, cause and location and the insured should be able to measure the frequency and severity of the loss exposure |
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Term
| Large number of similar exposure units |
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Definition
| So that the insurer can predict accurately future losses based on the law of large numbers |
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Term
| Independent and not catastrophic |
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Definition
| A loss by one insured should not affect other insureds and a large number of exposure units should not be insured in similar areas to avoid a large number of losses in the event of a catastrophe |
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Term
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Definition
| The insurer should be able to charge an economically feasible premium |
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Term
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Definition
| Any type of insurance that indemnifies an insured who suffers a financial loss because property has been lost stolen damaged or destroyed |
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Term
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Definition
| INsurance that covers losses resulting from the insured's liability to others |
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Term
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Definition
| A policy that covers most of the property and liability loss exposures that arise out of residential property ownership and occupancy as well as property that liability loss exposures that individuals and families may have while they are away from their residences |
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Term
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Definition
| An insurance policy that covers an individual or a faily against loss exposures arising out of the ownership, maintenance or use of automobiles |
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Term
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Definition
| Coverage for direct and accidental loss or damage to a covered auto by any peril except collision or overturn or a peril specifically excluded |
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Term
| Personal watercraft policy |
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Definition
| An insurance policy that covers an individuals loss exposures arising out of the ownership maintenance or use of watercraft used principally for recreational or personal transportation purposes |
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Term
| Umbrella liability policy |
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Definition
| A liability policy that provides excess coverage above underlying policies and may also provide coverage not available in the underlying policies, subject to a self insured retention |
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Term
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Definition
| INsurance that pays for extended medical care or custodial care received in a nursing home, hospital or home |
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Term
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Definition
| A type of life insurance that makes periodic payments to the recipient for a fixed perio or for life in exchange for a specified premium |
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Term
| Commercial package policy |
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Definition
| Policy that covers two or more lines of business by combining ISO's commercial lines coverage parts |
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Term
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Definition
| A package policy that combines most of the property and liability coverages needed by small and medium sized businesses |
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Term
| Commercial auto insurance |
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Definition
| Insurance that covers a business or not-for-profit organization against loss exposures arising out of the ownership, maintenance or use of automobiles |
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Term
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Definition
| Coverage for damage to or theft of a covered auto that can include both collision coverage and comprehensive coverage |
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Term
| Commercial property insurance |
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Definition
| Insurance that covers commercial buildings and their contents against various types of property loss |
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Term
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Definition
| Insurance that covers vessels and their cargoes including various vessel-related liability exposures |
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Term
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Definition
| Insurance that covers many different classes of property that typically involve an element of transportation |
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Term
| Commercial crime insurancw |
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Definition
| Insurance that covers 1)money and securities against numerous perils (not limited to crime perils) and 2) property other than money and securities against crime perils such as employee theft, robbery, theft by outsiders and extortion |
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Term
| Professional liability insurance |
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Definition
| Insurance that covers persons engaged in various occupations against liability resulting from their rendering or failing to render professional services |
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Term
| Workers compensation insurance |
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Definition
| Insurance that pays the cost of medical care, lost wages, and other benefits when employees are injured on the job |
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Term
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Definition
| An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders |
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Term
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Definition
| An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them. They also give dividends |
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Term
| Reciprocal insurance exchange |
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Definition
| An insurer owned by its policyholders, formed as an unincorporated association for the purpose of providing insurance coverage to its members (called subscribers) and managed by an attorney-in-fact. Members agree to mutually insure each other and they share profits and losses in the same proportion as the amount of insurance purchased from the exchange by that insurer |
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Term
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Definition
| An insurer whose operations resemble that of a stock insurer. It is an unincorporated association and its individual investors are called a "name". It has earned a reputation for accepting applications for unusual types of insurance |
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Term
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Definition
| A subsidiary formed to insure the loss exposures of its parent company and the parent's affiliates. Provides low insurance cost, insurance availability and improved cash flow. |
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Term
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Definition
| The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer (the reinsurer) agrees, in return for a reinsurance premiumd, to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primary's insurance policies. |
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Term
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Definition
| Involves determining the products or services customers want and need and delivering them to those customers |
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Term
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Definition
| The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions and then monitoring the underwriting decisions made |
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Term
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Definition
| An insurer employee who evaluates the applicants for insurance, selects those that are acceptable to the insurer, prices coverage and determines policy terms and conditions |
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Term
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Definition
| Methodical examination of a policyholder's operations, records and books of account to determine the actual exposure units and premium for insurance coverages already provided |
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Term
| Purposes of government insurance programs |
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Definition
1. To fill unmet needs in the private insurance market
2. To facilitate compulsory insurance purchases
3. To provide efficiency in the market and convenience to the insured
4. To achieve collateral social purposes |
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Term
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Definition
| Government programs can provide coverage for loss exposures that insurers may not want to cover. ie TRIP |
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Term
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Definition
| Government insurance involving reinsurance. An insurer underwrites the policies, collects premium etc and the government reimburses them for all or part of the loss |
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Term
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Definition
| Government insurance program under which the federal government underwrites the policies but private insurers deliver the policies to consumers and take a portion of the premium as sales commission |
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Term
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Definition
| Federal government program where the government subsidizes and reinsures a private insurer. The private insurer acts as primary and government is reinsurer |
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Term
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Definition
| State government program that makes basic property insurance available to those that may not be able to purchase it otherwise because of their property's location or any other reason |
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Term
| Workers compensation insurance program |
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Definition
| State government insurance program that helps employers meet their obligations under state statutes |
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Term
| Beach and windstorm plans |
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Definition
| Make property insurance against the windstorm cause of loss available to property owners who are otherwise unable to obtain insurance because of their property's location |
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Term
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Definition
| State government plan that makes compulsory automobile liability coverage available to high-risk drivers who have difficulty purchasing coverage at a reasonable rate in the private market |
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Term
| Why are insurer's operations regulated? |
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Definition
| The protect consumers, To maintain insurer solvency and To prevent destructive competition |
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Term
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Definition
| The ability of an insurer to meet its financial obligations as they become due even those resulting from insured losses that may be claimed several years in the future. |
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Term
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Definition
| An insurer license to operate in a state but incorporated in another state. |
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Term
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Definition
| An insurer doing business in the jurisdiction in which it is incorporated |
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Term
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Definition
| An insurer domiciled in a country other than the united states |
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Term
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Definition
| An insurer to which a state insurance department has grancted a license to do business within that state |
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Term
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Definition
| An insurer not authorized by the state insurance department to do business within that state |
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Term
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Definition
| State laws that permit producers with a surplus lines license to write business for an acceptable "nonadmitted insurer when protection from admitted insurers is not available." |
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Term
| Three major criteria considered in approving insurance rates |
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Definition
1. Adequate to pay all claims and expenses
2. Not excessive
3. Not unfairly discriminatory |
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Term
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Definition
| Rates are set by a state agency and all licensed insurers are required to use those rates |
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Term
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Definition
| Rates and supporting rules must be filed with an approved by the state insurance department before they can be used |
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Term
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Definition
| The insurer must file rates and supporting rules with the state insurance department prior to their use but the rates can then be used immediately without specific approval |
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Term
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Definition
| Rates must be filed with the state insurance department within a specified period after they are put into use |
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Term
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Definition
| An insurance rating law under which prior approval is required only if the new rates exceed a certain percentage above (and sometimes below) the rates previously filed |
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Term
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Definition
| Allows insurers to develop and use rates without having to file with or get approval from the state insurance department |
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Term
| Why are insurance policy forms regulated |
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Definition
1. Should be clear and readable
2. Detect any policy provisions that are unfair or unreasonable |
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Term
| Market conduct regulation |
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Definition
| Regulation of the practices of insurers in regard to four area of operations: sales practices, underwriting practices, claim practices and bad faith actions. |
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Term
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Definition
| The process, conducted by state insurance regulators of verifying the solvency of insurers and determining whether their financial condition enables them to meet their financial obligations and to remain in business |
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Term
| National association of insurance commissioners (NAIC) |
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Definition
| An association of insurance commissioners from the fifty US states, the District of Columbia and the five US territories and possessions whose purpose is to coordinate insurance regulation activities among the various state insurance departments |
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Term
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Definition
| The primary financial statement prepared by insurers and required by every state insurance department |
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Term
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Definition
| The amount the insurer estimates and sets aside to pay on an existing claim that has not been settled |
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Term
| Insurance regulatory information system |
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Definition
| An information and early-warning system established and operated by the NAIC to monitor the financial soundness of insurers. If an insurer is determined insolvent, it is placed in receivership |
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Term
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Definition
| A state-established fund that provides a system for the payment of some of the unpaid claims of insolvent insurers licensed in that state, gnerally funded by assessments collected from all insurers licensed in the state |
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Term
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Definition
| Collectively, insurers who voluntarily offer insurance coverages at rates designed for customers with average or better-than-average loss exposures |
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Term
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Definition
| Insurance obtained from nonadmitted insurers when protection is not available from admitted insurers |
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Term
| Classes of surplus lines business |
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Definition
| Unusual or unique loss exposures, nonstandard business, insureds needing high limits of coverage, insureds needing unusualyl broad coverage, loss exposures that require new forms |
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Term
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Definition
| Anyof several kinds of insurance personnel who place insurance business with insurers and who represent either insurers or insureds or both |
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Term
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Definition
| In the agency relationship, the party that is authorized by the principal to act on the principal's behalf |
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Term
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Definition
| A legal, consensual relationship that exists when one party, the agent acts on behalf of another party, the principal |
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Term
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Definition
| The party in an agency relationship that authorizes the agent to act on that party's behalf ie the insurer |
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Term
| Legal responsibilities of the agent to the principal |
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Definition
1. Be loyal to the principal
2. obey the principal's lawful instructions
3. Exercise a reasonable degree of care
4. Account promptly for any of the principal's money
5. Keep the principal informed of all facts |
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Term
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Definition
| The authority implicitly conferred on an agent by customer, usage, or a principal's conduct indicating intention to confer such authority |
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Term
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Definition
| The authority that the principal specifically grants to the agent |
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Term
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Definition
| Authority conferred by the principal on an agent under an agency contract |
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Term
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Definition
| An insurance agent's authority to effect coverage on behalf of the insurer |
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Term
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Definition
| A third party's reasonable belief that an agent has authority to act on the principal's behalf |
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Term
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Definition
| A business operated for the benefit of its owner that sells insurance usually as a representative of several unrelated insurers |
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Term
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Definition
| An independent producer who represents insurance customers |
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Term
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Definition
| The record of an insurance agency's present policyholders and the dates their policies expire. An independent agency has the right to sell this list to another independent agent |
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Term
| Independent agency network |
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Definition
| A group of agencies that contractually link to share services, resources and insurers to gain advantages normally available only to large regional and national brokers |
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Term
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Definition
| An authorized agent of the primary insurer that manages all or part of the primary insurer's insurance activities, usually in a specific geographic area |
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Term
| Exclusive agency marketing system |
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Definition
| An insurance marketing system under which agents contract to sell insurance exclusively for one insurer or an associated group of insurers. Generally the insurer handles many administrative functions for the agent |
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Term
| Direct writer marketing system |
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Definition
| An insurance marketing system that uses sales agents who are direct employees of the insurer. |
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Term
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Definition
| Internet, Call centers, Direct response, Group marketing, trade associations, Financial institutions. |
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Term
| Methods of prospecting by an agent |
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Definition
| Referrals, referrals from strategic partners, advertising, interactive web sites, telephone solicitations and cold canvas |
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Term
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Definition
| The premium is forwarded to the insurer when the producer collects it or when it becomes due. The producer is not required to pay the principal until premium has been collected |
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Term
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Definition
| The insurer sends a statement to the producer the premiums that are due. The producer is obligated to pay premiums indicated. |
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Term
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Definition
| The producer prepares statements showing the premiums due to the insurer, after deducting appropriate commissions and transmits that amount to the insurer |
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Term
| Functions of insurance producers |
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Definition
| Prospecting, Risk management review, Sales, policy issuance, premium collection, customer service, claim handling, and consulting |
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Term
| Contingent commission agreement |
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Definition
| A contract provision in which an insurer agrees to make supplemental payments to producers based on profitability alone or on a combination of profitability, volume and growth in the agency's book of business placed with that insurer |
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Term
| Types of unfair trade practices |
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Definition
| Misrepresentation and false advertising, Tie in sales, rebating, other deceptive practices |
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Term
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Definition
| Guarding against adverse selection, ensuring adequate policyholders' surplus enforcing underwriting guidelines |
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Term
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Definition
| In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance |
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Term
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Definition
| The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus |
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Term
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Definition
| The scope of decision that tan underwriter can make without receiving approval from someone at a higher level |
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Term
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Definition
| A written manual that communicates an insurer's underwriting policy and that specifies the attributes of an account that an insurer is willing to insure |
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Term
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Definition
| Underwriter who is primarily responsible for implementing the steps in the underwriting process |
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Term
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Definition
| Underwriter who is usually located in the home office and who assists underwriting management with making and implementing underwriting policy |
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Term
| Line underwriter activities |
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Definition
| Select insureds, classify and price accounts, recomment or provide coverage, manage a book of business, support producers and insureds, coordinate with marketing efforts |
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Term
| Staff underwriter activities |
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Definition
| Research the market, formulate underwriting policy, revise underwriting guidelines, evaluate loss experience, research and develop coverage forms, review and revise pricing plans, arrange treaty reinsurance, assist others with complex accounts, conduct underwriting audits, participate in industry associations, conduct education and training |
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Term
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Definition
| A merge of a special agent/field representative and a line underwriter. Assists producers in developing accounts that are acceptable to the insurer |
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Term
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Definition
| A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically insured |
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Term
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Definition
| Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer and the reinsurer can accept or reject any loss exposures submitted |
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Term
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Definition
| A review of underwriting files to ensure that individual underwriters are adhering to underwriting guidelines |
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Term
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Definition
| A tangible characteristic of property, persons or operations that tends to increase the frequency of loss |
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Term
| Morale hazard (attitudinal hazard) |
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Definition
| A condition of carelessness or indifference that increases the frequency or severity of loss |
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Term
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Definition
| A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss |
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Term
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Definition
| A condition of the legal environment that increases loss frequency or severity |
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Term
| Steps in the underwriting process |
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Definition
1. Evaluate the submission
2. Develop underwriting alternatives
3. Select an underwriting alternative
4. determine an appropriate premium
5.Implement the underwriting decision
6. Monitor the underwriting decision |
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Term
| Sources of underwriting information |
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Definition
| Producers, applications, inspection reports, government records, financial rating services, loss data, field marketing personnel, claim files |
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Term
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Definition
| Adjusts the insured's premium for the upcoming policy period based on the insured's experience for the current period |
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Term
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Definition
| Awards debits and credits based on specific categories such as the care and condition of the premises or the training and selection of employees to modify the final premium to reflect factors that the class rate does not include |
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Term
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Definition
| Adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period; paid losses or incurred losses may be used to determine loss experience |
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Term
| Factors to consider when selecting an underwriting alternative |
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Definition
| Underwriting authority, supporting business, mix of business, producer relationships, regulatory restrictions |
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Term
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Definition
| The price per exposure unit for insurance coverage |
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Term
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Definition
| A resource for classifying accounts and developing premiums for given types of insurance; includes necessary rules, factors and guidelines to apply those rates |
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Term
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Definition
| A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued |
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Term
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Definition
| The unit of measure used to determine an insurance premium |
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Term
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Definition
Auto: each vehicle
Commercial property: each $100 of insured value
General liability: various exposure units
Homeowners: each $1,000 of insured value
Workers compensation: each $100 of payroll |
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Term
| Underwriting management tasks |
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Definition
| Participate in overall management, Arrange reinsurance, Delegate underwriting authority, Develop and enforce underwriting guidelines, monitor underwriting results |
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Term
| Unfair discrimination in underwriting |
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Definition
| Cancelling coverage based solely on geographic loacation, gender, marital status or race |
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Term
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Definition
| A mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future ouctomes also increases |
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Term
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Definition
| A rating approach that uses rates reflecting the average probability of loss for businesses within large groups of similar risks, the predominant method used for rating commercial properties |
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Term
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Definition
| Historical loss data gathered-->Prospective loss costs established-->Loss cost data entered into rating system-->insurer adjusts for expenses, profits and contingencies-->insurer determines final rate |
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Term
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Definition
| A type of insurance rate that reflects the unique characteristics of an insured or the insured's property |
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Term
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Definition
| Rating used by underwriters to rate one-of-a-kind risks |
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Term
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Definition
| The price per exposure unit determined by adjusting the prospective loss costs for expenses, profits and contingencies |
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Term
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Definition
| A party that makes a claim and can be either a first-party claimant or a third party claimant |
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Term
| Third party administrator |
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Definition
| An organization that provides administrative services associated with risk financing and insurance |
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Term
| Staff claim representatives |
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Definition
| Employees of an insurer who handle most claims from the insurer's office |
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Term
| Outside/field claim representative |
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Definition
| Handles claims that require such tasks as investigating the scene of the loss, meeting with insureds, claimants and lawyers, and inspecting damages |
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Term
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Definition
| An independent claim representative who handles claims for insurers for a fee |
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Term
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Definition
| An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee |
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Term
| Quantitative audit factors |
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Definition
1. Timeliness of reports, reserving and payments
2. Number of files opened, closed and reopened each month
3. Percentage of recovery from subrogation
4. Average claim settlement value by claim type
5. Perentage of claims entering litigation or going to trial
6. Accuracy of data entry |
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Term
| Qualitative audit factors |
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Definition
1. Realistic reserving
2. accurate evaluation of insured's liability
3. follow-up on subrogation opportunity
4. litigation cost management
5. proper releases taken
6. correct coverage evaluation
7. good negotiation skills
8. thorough investigations |
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Term
| Steps of the claim handling process |
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Definition
1. Acknowledging and assigning the claim
2. Identifying the policy and setting reserves
3. contacting the insured or the insured's representative
4. investigating the claim
5. documenting the claim
6. Determining cause of loss, liability and the loss amount
7. concluding the claim |
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Term
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Definition
| A signed agreement indicating that during the course of investigation neither the insurer nor the insured waives rights under the policy |
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Term
| Reservation of rights letter |
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Definition
| An insurer's letter that specifies coverage issues and informs the insured that the insurer is handling the claim with the understanding that the insurer may later deny coverage should the facts warrant it |
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Term
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Definition
| The process by which an insurer can after it has paid a loss under the policy recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss |
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Term
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Definition
| Disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement |
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Term
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Definition
| Disputing parties use a neutral outside party to examine the issues and develop a settlement which can be final and binding |
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Term
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Definition
| A method of resolving disputes between insurers and insureds over the amount owed on a covered loss |
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Term
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Definition
| A case undergoes an abbreviated version of a trial before a panel or an adviser who poses questions and offers opinions on the outcome of a trial based on the evidence presented |
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Term
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Definition
| Disputing parties participate in an abbreviated trial presenting the evidence of a few witnesses to a panel of mock jurors who decide the case |
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Term
| Four questions to verify a property claim is covered |
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Definition
1. Does the insured have an insurable interest in the property?
2. Is the damaged property covered by the policy?
3. Is the cause of loss covered by the policy?
4. Do any additional coverages, endorsements or coverage limitations apply? |
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Term
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Definition
| Cost to replace property with new property of like kind and quality less depreciation |
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Term
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Definition
| The reduction in value caused by the physical wear and tear on technological or economic obsolescence of property |
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Term
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Definition
| The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation |
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Term
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Definition
| A method of valuing property in which the insurer and the insured agree at the time the policy is written on the maximum amount that will be paid in the even of a total loss |
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Term
| Three factors used to determine the replacement cost of real property |
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Definition
1. Square footage of the property
2. Type and quality of construction
3. construction cost per sq foot |
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Term
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Definition
| A loss that occurs when the cost to repair damaged property plus its remaining salvage value equals or exceeds the property's pre-loss value |
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Term
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Definition
| A payment awarded by a court to reimburse a victim for actual harm |
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Term
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Definition
| A form of compensatory damages that waards a sum of money for specific identifiable expenses associated with the inured person's loss, such as medical expenses or lost wages |
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Term
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Definition
| A monetary award to compensate a victim for losses such as pain and suffering that do not involve specific measurable expenses |
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Term
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Definition
| A payment awarded by a court to punish a defendant for reckless, malicious or deceitful acts to deter similar conduct. The award need not bear any relation to a party's actual damages |
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Term
| Elements of good-faith claim handling |
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Definition
1. thorough timely and unbiased investigation
2. complete and accurate documentation
3. fair evaluation
4. good faith negotiation
5. regular and prompt communication
6. competent legal advice
7. effective claim management |
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