question

insurance

answer

a contract whereby one undertakes to indemnify against loss, damage or liability from a contingent unknown event

question

pure risk

answer

two possible outcomes loss or no loss but no chance for gain or profit

question

STARR

answer

Share- insurance companies share the risk "reinsurance" Transfer- when risk is shifted to another (buying insurance) Avoid- avoiding risk/certain activities Reduce- take steps to prevent chance of loss occurring (smoke alarms) Retain- person or entity has money to cover loss and does not buy insurance

question

Peril/Hazard

answer

peril-actual cause of loss, hazard- anything that increases the chance of loss or severity of loss due to peril

question

legal hazard

answer

chance of certain risk ending up in court

question

moral hazard

answer

associated with mental attitudes, behaviors and habits

question

physical hazard

answer

anything that poses a risk and can be seen, heard, touched, tasted or smelled

question

morale hazard

answer

deals with a person's state of mind (carelessness)

question

law of large numbers

answer

the larger the amount of information gathered to develop statistics the more reliable the information will be. (the more accurate the premiums will be)

question

loss exposure

answer

the degree to which a person or property is at a risk for loss

question

indemnity

answer

the insurer restores the insured to the condition the insured was in before the loss occurred. prevents insured from profiting from loss and reduces moral hazards

question

loss ratio

answer

incurred loss+ loss adjusting expense/ earned premium

question

stock insurance companies

answer

policyholders do not get dividends

question

mutual insurance companies

answer

policyholders get dividends

question

reciprocal insurance exchanges

answer

unincorporated company that consists of subscribers managed by an attorney

question

fraternal organizations

answer

charitable acts

question

adverse selection

answer

when people seek insurance at the last minute when they need it. usually are accepted at a higher rate, restrictions are added to coverage or risk is not accepted

question

spread of risk

answer

when a company works to pay claims and other expenses and still makes a profit

question

profitable distribution of exposures

answer

when preferred risks are balanced with poor risks and average risks are in the middle

question

contract of adhesion

answer

prepared by insurer and accepted or rejected by insured

question

aleatory

answer

if the contract has values that are not equal

question

unilateral

answer

contains the exchange of a premium for a promise

question

conditional

answer

the insurers consideration is a promise to pay only if a covered loss occurs

question

personal

answer

contract between insurance company and individual

question

utmost good faith

answer

both parties know all the material facts and any relevant information

question

fraud

answer

when one party intentionally provides false information or conceals relevant information in order to benefit from unlawful gain

question

concealment

answer

hiding information vital to making a decision about a contract

question

misrepresentation

answer

a written or oral statement that is stated in order to intentionally distract, deceive or mislead a party to contract

question

estoppel

answer

misleading actions of an insurance company agent result in the insured being stopped from preforming according to the provisions of the contract

question

recission

answer

revocation of a contract

question

direct writing systems

answer

company deals directly with the insured, using its own employees instead of insurance agencies

question

direct mail or internet systems

answer

company sends advertisements directly to the public in mass quantities (tv, mail, internet)

question

exclusive agencies

answer

captive or exclusive agent who represents one company and is paid a salary or commission

question

independent agencies

answer

an independent agent represents more than one insurer and more than one company. usually charge a broker fee

question

express authority

answer

specific authority a principal gives to the agent in writing

question

implied authority

answer

not in writing and not specifically expressed by company but customarily given to agent

question

apparent authority

answer

what the public logically has reason to believe the agent has because of the agent's position

question

errors and omissions insurance

answer

liability for non medical professionals that pays for losses or the defense of lawsuits the might be filed against them

question

domestic insurer

answer

insurance company that is incorporated in this state

question

foreign insurer

answer

insurance company that is incorporated in another state

question

alien insurer

answer

insurance company that is incorporated in another country

question

reciprocal insurance companies

answer

These companies are unincorporated groups of people providing insurance for one another through individual indemnity agreements.

question

Lloyd's of London

answer

composed of different syndicates made up of people with high net worth who bid on coverage for jumbo, specialized and exotic risks and reinsurance. It is a membership market

question

private non-commercial insurers

answer

These include service insurance organizations that are non-profit and are found mostly in health insurance.

question

US Government

answer

coverage for military, health, life, national flood, national crop and national mortgage coverage. state provides earthquake, unemployment and workers comp

question

McCarren-Ferguson Act of 1945

answer

clarify confusion between state and federal regulation. decided that state regulation of insurance was better than federal

question

Paul v Virginia (1868)

answer

insurance policy was not an instrument of commerce therefore not subject to federal regulation

question

SEUA Case of 1944

answer

reversed Paul v Virginia and state that insurance was an interstate commerce and under federal regulation

question

Graham-Leach-Bliley Act

answer

protects consumers personal financial information. financial privacy rule, safeguards rule and pretexting provisions

question

California Financial Information Privacy Act(2004)

answer

strongest financial privacy protections. consumers have final say in sharing info and restricts financial profiling

question

HIPAA

answer

The Health Insurance Portability and Accountability Act, a federal law protecting the privacy of patient-specific health care information and providing the patient with control over how this information is used and distributed.

question

California Uniform Insurers Rehabilitation Act

answer

describes steps commissioner must take to stabilize its financial condition of present a petition to the state superior court w/ petition for conservation or liquidation

question

insolvent insurer

answer

someone who can't meet the minimum required and/or can't meet financial obligations due

question

California Guaranty Association

answer

The association's purpose is to provide each member with insolvency insurance and indemnity toward claims of policyholders of an insolvent company. Illegal to advertise coverage

question

Prior Approval (rating law)

answer

insurers must file rate information and deliver evidence that rates are reasonable. Commissioner has 30-60 days to approve new rates and 180 days on rate changes

question

File and Use (rating law)

answer

first file rates then use

question

Use and File (rating law)

answer

first use rates then file

question

Open Competition (rating law)

answer

allow insurers to compete with each other by quickly changing rates without review

question

Negligence

answer

failure to do what a reasonable person would do in a given circumstance

question

absolute liability

answer

absolute legal responsibility for an injury that can be imposed on the wrongdoer without proof of carelessness or fault

question

strict liability

answer

legal responsibility for damages or injury even if person found strictly liable was not at fault or negligent

question

gross negligence

answer

irresponsible behavior showing disregard for the safety or lives of others

question

vicarious liability

answer

liability of one party for the actions of another

question

punitive damages

answer

form of punishment imposed by the court upon the person responsible for the loss

question

compensatory damages

answer

amounts paid for actual loss or injury sustained. expenses can be added for loss of time, suffering and mental anguish

question

specific damages

answer

valued amounts like medical bills

question

general damages

answer

losses not easily measured in dollar amounts

question

contributory negligence

answer

injured party must be completely free of fault in order to collect

question

comparative negligence

answer

if injured party is partly responsible damages are reduced based on how fault lies with injured party

question

pure no fault law

answer

provided payment of loss from insured's carrier regardless of fault. everyone paid for their own

question

modified no fault laws

answer

settlement amounts are modified based on premise of comparative negligence where each person is assigned a percentage of negligence and paid accordingly

question

short rate

answer

policy is cancelled by insured before it reaches the expiration date. "service charge"

question

flat rate

answer

insured cancels the same day policy was started. 100% refund of premium

question

pro-rata

answer

termination of an insurance contract or bond in which premium charge is adjusted in proportion to exact time the protection has been in force

question

subrogation

answer

insured party willingly gives up right to sue another person who is at fault for a covered loss

question

arbitration

answer

method of claim settlement used when insured and insurer cannot agree upon amount of loss

question

severability

answer

insurance policy applies separately to each insured person.

question

liberalization

answer

insurers making a revision in the policy before the effective date. broadens coverage with no additional premium

question

actual cash value

answer

what item would cost new - amount of depreciation

question

replacement cost

answer

company will pay insured amount needed to replace item lost

question

market value

answer

how much property would sell for on the open market

question

agreed value

answer

agreed up on value of property at time policy is written.

question

stated value

answer

pays amounts based on appraisal made at time of contract before loss occurred. if it can be rebuilt or repaid for less, they will

question

auto gap coverage

answer

gap between how much you owe and its actual cash value

question

CAARP

answer

A program that helps drivers with poor driving records secure insurance who cannot get insurance through ordinary methods. must try for 60 days to get insurance through regular market

question

risk retention group

answer

a liability insurance company owned by its members. under the liability risk retention act they must be domiciled in a state

question

state insolvency guaranty funds

answer

not available for RRG. have to be eligible for membership to get this insurance

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