CPCU 520: Insurance Operations 2nd Edition/Chapter 1: Overview of Insurance Operations

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CPCU 520: Insurance Operations 2nd Edition/Chapter 1: Overview of Insurance Operations
2014-11-03 18:53:43
CPCU520 CPCU Insurance
CPCU 520
Chapter 1 of CPCU 520, 2nd Edition
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  1. Proprietary insurer
    Insurer formed for the purpose of earning profit for its owners.
  2. Mutual insurer
    An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.
  3. Reciprocal insurance exchange (interinsurance exchange)
    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 purchased from the exchange by that member.
  4. Fair Access to Insurance (FAIR) plans
    An insurance pool through which private insurers collectively address an unmet need for property insurance on urban properties, especially those susceptible to loss by riot or civil commotion.
  5. Residual market
    The term referring collectively to insurers and other organizations that make insurance available through a shared risk mechanism to those who cannot obtain coverage in the admitted market.
  6. Surplus lines broker
    A person or firm that places business with insurers not licensed (nonadmitted) in the state in which the transaction occurs but that is permitted to write insurance because coverage is not available through standard market insurers.
  7. Independent agency and brokerage marketing system
    An insurance marketing system under which producers (agents and brokers), who are independent contractors, sell insurance, usually as representatives of several unrelated insurers.
  8. Direct writer marketing system
    An insurance marketing system that uses sales agents (or sales representatives) who are direct employees of the insurer.
  9. Exclusive agency marketing system
    An insurance marketing system under which agents contract to sell insurance exclusively for one insurer (or for an associated group of insurers).
  10. Distribution channel
    The channel used by the producer of a product or service to transfer that product or service to the ultimate customer.
  11. Probable maximum loss (PML)
    The largest loss that an insured is likely to sustain.
  12. Underwriting
    The process of selecting insureds, pricing coverage, determining insurance policy terms and conditions, and then monitoring the underwriting decision made.
  13. Book of business
    A group of policies with a common characteristic, such as territory or type of coverage, or all policies written by a particular insurer or agency.
  14. Underwriting guidelines
    A written manual that communicates an insurer's underwriting policy and that specifies the attributes of an account that an insured is willing to insure.
  15. Adverse selection
    In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.