Life & Health Insurance Exam 2

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gizzygib
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292380
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Life & Health Insurance Exam 2
Updated:
2015-01-07 14:17:19
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General Insurance
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General Insurance
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General Insurance Review: 9 Types of Insurers and 8 Types of Marketing Systems
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  1. What is an Insurer?
    The insurance company
  2. What are premiums?
    The insurance company receives relatively small amounts of money, referred to as premiums. Premius are from each of a large number of people buying insurance
  3. What is the industry's term for "the bill that must be paid to purchase the policy"?
    Premium
  4. Premium defined
    • 1. The consideration for the Insurance.
    • 2. A periodic payment made to keep a policy in force.
  5. What is a Contract of Insurance, or Policy?
    The agreement between the insurer and the policy owner (the person who owns the insurance)is established in a legal document.
  6. How is Loss defined?
    Loss is defined as the reduction in the value of an asset. 
  7. How to be paid for a Loss?
    The insured must notify the insurer by making a claim.
  8. What is a claim?
    A demand for payment under the insurance policy.
  9. Nine types of Insurers. List
    • 1.Stock Insurer
    • 2. Mutual Insurer
    • 3. Reciprocal Organizations
    • 4. Fraternal Insurers
    • 5. Reinsurance
    • 6. Surplus Lines
    • 7. Lloyd's Association
    • 8. Government Insurers


    • 1. Stock insurers: the policy refereed to "non-par" or" non-participating" policy. The owners of insurance products do not share in the profits of the company. Individual stockholders provide capital for the insurer. In return they share in any profits or losses.
    • 2. Mutual Insurers: Is a mutual company, no stockholders like above. Therefore, ownership rests with the policy owners. Policy dividends are paid to policy owners, not stock holders. Dividends are never guaranteed. Also, mutual company dividends are not taxable. Theses policies are known as particpating or "par" contracts.
    • 3. Reciprocal Organizations: unincorporated group of individuals, with each party insuring the other members, known as a subscriber. Or also known as an Assessment Insurer. This means the unincorprated group of individuals can assess the subscribers for added funds, if needed. This is what makes mutual and stock companies  different in having to cover their losses , without safety net of being able to ask for more money from the insured.
    • 4. Fraternal Insurers: Are Life Insurance carriers that exist as social organization, such as charities and benevolent activities.
    • Same as a reciprocal Organization, fraternal insurers can assess the policy owners in times of financial difficulty. Non-taxable dividends may be paid out to to members as in a reciprocal company. Also, insureds are paying part of their premiums for organizational membership and support charitable causes fraternal order supports.
    • 5. Reinsurance :is insurance that is purchased by an insurance company (the ceding company) from another insurance company( the re insurer) through a broker as a means of risk management. They enter into a reinsurance agreement, called a Treaty Reinsurance, which details the conditions which the re insurer (other insurance company) would pay a share of claims incurred by ceding company.two types of reinsurance between insurers.
  10. Define Stock Insurers
    1. Stock insurers: the policy refereed to "non-par" or" non-participating" policy. The owners of insurance products do not share in the profits of the company. Individual stockholders provide capital for the insurer. In return they share in any profits or losses.
  11. Define Mutual Insurers.
    2. Mutual Insurers: Is a mutual company, no stockholders like above. Therefore, ownership rests with the policy owners.Policy dividends are paid to policy owners, not stock holders.Dividends are never guaranteed. Also, mutual company dividends are not taxable. Theses policies are known as particpating or "par" contracts
  12. Define Reciprocal Organizations.
    3. Reciprocal Organizations: unincorporated group of individuals, with each party insuring the other members, known as a subscriber. Or also known as an Assessment Insurer. This means the unincorprated group of individuals can assess the subscribers for added funds, if needed. This is what makes mutual and stock companies  different in having to cover their losses , without safety net of being able to ask for more money from the insured.
  13. Define Fraternal Organizations.
    4. Fraternal Insurers: Are Life Insurance carriers that exist as social organization, such as charities and benevolent activities.Same as a reciprocal Organization, fraternal insurers can assess the policy owners in times of financial difficulty. Non-taxable dividends may be paid out to to members as in a reciprocal company. Also, insureds are paying part of their premiums for organizational membership and support charitable causes fraternal order supports.
  14. Define Reinsurance.
    5. Reinsurance :is insurance that is purchased by an insurance company (the ceding company) from another insurance company( the re insurer) through a broker as a means of risk management. They enter into a reinsurance agreement, called a Treaty Reinsurance, which details the conditions which the re insurer (other insurance company) would pay a share of claims incurred by ceding company.two types of reinsurance between insurers
  15. Define Facultative Reinsurance.
    The insuring company negotiates with the re insurer; therefore, each decision is made on a case-by-case basis.
  16. What is Retain Rate Stability, in regards to reinsurance ?
    Reinsurance allows companies to retain rate stability, so each individual company does not need to set aside larger amounts of reserve to protect against an unusually large claim.
  17. Define Domicile of Incorporation.
    An insurance company is defined by its corporate status and by location of its corporate headquarters.
  18. Define Domestic Insurer vs. Foreign Insurer vs. Alien Insurer.
    A Domestic insurer is incorporated under laws of its state in which it conducts business; if it conducts business in a state other than where its offices are located, it is considered a Foreign Insurer. Insurer is incorporated in a country other than United States, it is an Alien Insurer. 

    • Domestic Insurer: Insurer incorporated in Ohio conducting business in  Ohio .
    • Foreign Insurer: Same Ohio -based insurer conducting business in Utah.
    • Alien Insurer: Insurer incorporated in Canada conducting business anywhere in U.S. or its territories.
  19. How is an insurance company must be admitted and authorized to conduct business?
    It is required to secure a license from the Department of Insurance to sell insurance in a particular state. Once licensed, admitted into state as a legal insurer and is authorized to conduct business.
  20. What does licensing power used to do? And who is Ohio Guaranty Association?
    Licensing power is used to regulate company activity. They are assessed annually for contributions to the Ohio Guaranty Association. The Guaranty fund protects Ohio insured against insolvency of an insurance company admitted and doing business in Ohio.
  21. What is insolvency in a State Guaranty Fund?
    • A State Guaranty Fund is administered by state to protect policy holders in the event an insurance company defaults on benefit payments or becomes insolvent
    • These state funds act as insurance for insurance, and are funded by insurance companies that sell insurance in a given state.
  22. What is the Independent Financial Rating Services?
    • It determines the financial strength of a prospective carrier. 
    • A.M. Best's Guide (best one)
    • Standard & Poor, Moody's , Fitch and TheStreet.com( Weiss group)These are private publications rate insurance companies according to the amount of financial reserve available to pay future claims and other liabilities.
  23. Define Independent Insurance Agent.
    • An independent agent:
    • 1. Are paid a commission.
    • 2. owns business sold, meaning the agent will keep the future renewal commissions on business that stays in force. 
    • 3. They work for themselves or other agents.
    • 4. Sell insurance products of several companies and work for themselves or other agents.
  24. Define Exclusive or Captive agents.
    They represent only ONE company.They do NOT own business; therefore, agent leaves position, the agents block of policies goes to another agent.
  25. General Agent explain.
    • If a group of agents is working for the exclusive agent, the employing agent then becomes a General Agent who handles recruitment and training.
    • General Agent is paid by an overriding commission, a commission paid in addition to that paid to the soliciting agent or broker.
  26. Companies that sell through agents vary by whether the agents are employees or independent contractors, and by who owns the business they sell. List 8 examples of Marketing Systems.
    • 1.Independent insurance agents
    • 2. Exclusive or Captive agents
    • 3. Managing General Agents (MGA)
    • 4. Direct Writing Companies
    • 5. Mass marketing
    • 6. Direct -Response
    • 7. Non- Insurance Sponsors
    • 8. Vending Machine Sales
  27. What are MGA's?
    Managing General Agents, may be independent, representing several insurance companies, or they may have an exclusive agreement with one company.
  28. Who are Direct Writing Companies?
    • They pay salaries to employees.
    • Insurance company owns the business and employees are NOT being compensated by individual commissions. 
    • Clients usually deal with these companies over the phone; clients of direct writing companies typically do NOT meet an agent.
  29. Mass Marketing types?
    • Most common types:
    • direct-response
    • non-insurance sponsors
    • vending machine sales
  30. Direct-Response Marketing.
    Direct-response marketing is conducted through the Mail, by advertisment in newspapers, tv, radio, internet. Some of theses policies a sold have limited benefits because of the adverse selection risk.
  31. Non-Insurance Sponsors.
    • Non-insurance sponsors, such as banks and credit card companies
    • A credit card company offers Life Insurance to cover card holder's balance in the event cardholder's death.Sponsor adds billing statement or deducted from checking account.
  32. Vending Machine Sales.
    • Travel accident policies sold from coin-operated machines at airports or bus stations.
    • A large amount of coverage is available at low premiums.
    • Coverage only available for duration of trip and usually covers accidental death.

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