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27 Cards in this Set
- Front
- Back
- 3rd side (hint)
Proprietary Insurer (Stock Insurer) |
Insurer formed for the purpose of earning a profit for it's owners. |
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Mutual Insurer (Cooperative Insurer) |
An insurer that is owned by it's policyholders and formed as a corporation for the purpose of providing insurance to them. |
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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 insurance in the admitted market. |
Non voluntary |
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Reciprocal Insurance Exchange |
An insurer owned by PHs, formed as unincorporated association to provide insurance to members. Managed by an attorney-in-fact. Members agree to mutually insure each other and share in profits and losses based on amount of insurance purchased by that member. |
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Fair Access to Insurance Requirements (FAIR Plans) |
An insurance pool through which private insurers collectively address an unmet need for property insurance on urban properties, especially those suceptible to loss by riot or civil commotion |
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Surplus Lines Broker |
A person or firm that places business with insurers not licensed (non-admitted) in the ssame state in which the transaction occurs but that is permitted to write insurance because coverage is not available through standard-market insurers |
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Lloyds of London |
Technically not an insurer. Does provide the physical and procedural facilities for its members to write insurance. It is a marketplace, similar to a stock exchange. Members are investors who hope to earn a profit from insurance operations. |
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Captive Insurer |
When a company forms a subsidiary company to provide all or part of its insurance. (self-insurance) |
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Domestic Insurer |
Insurerthat is incorporated within a specific state or, if not incorporated, is formedunder the laws of that state. |
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5 goals of insurers |
Earn a profit Meet customer needs Comply with legal requirements Diversify risk Fulfill their duty to society |
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Constraints on achieving insurer goals |
Internal constraints (Efficiency, expertise, size, financial resources, other) External constraints (Regulation, rating agencies, public opinion, competition, economic conditions, marketing and distribution) |
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Formula for calculating underwriting gain or loss |
Earned premiums - (incurred losses + underwriting expenses) = Underwriting gain or loss *Uderwriting expenses = acquisition expenses, general expenses, taxes, and fees |
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Formula for calcuating overall gain or loss from operations |
Net underwriting gain/loss + Investment gain/loss = overall gain/loss from operations |
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Independent agency and brokerage marketing system |
Aninsurance marketing system under which producers (agents or brokers), who areindependent contractors, sell insurance, usually as representatives of severalunrelated insurers. |
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Direct writer marketing system |
Aninsurance marketing system that uses sales agents (or sales representatives)who are direct employees of the insurer. |
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Exclusive agency marketing system |
Aninsurance marketing system under which agents contract to sell insuranceexclusively for one insurer (or for an associated group of insurers) |
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Distribution channel |
thechannel used by the producer of a product or service to transfer that productor service to the ultimate customer. |
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Probable Maximum Loss (PML) |
Thelargest loss that an insured is likely to sustain. |
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Underwriting |
The process ofselecting insureds, pricing coverage, determining insurance policy terms andconditions, and then monitoring the underwriting decisions made. |
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Book of business |
Agroup of policies with a common characteristic such as a territory or typeof coverage, or all policies written bya particular insurer or agency. |
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Underwriting guidelines (underwriting guide |
Awritten manual that communicates an insurer's underwriting policy and thatspecifies the attributes of an account that an insurer is willing to insure. |
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Adverse selection |
In general, the tendency for people with thegreatest probability of loss to be the ones most likely to purchaseinsurance. |
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Loss ratio |
Compares an insurer's incurred losses with its earned premium for a specific period |
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Loss ratio calculation |
Incurred losses / Earned premiums = Loss ratio |
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Expense ratio calculation |
Incurred underwriting expenses / written premiums = expense ratio |
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Trade Basis |
Comibines loss ratio and expense ratio to compare inflows and outflows from insurance underwriting |
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Trade basis (combined ratio) calculation |
(Incurred losses / earned premiums) + (Incurred underwriting expenses / Written premiums) = Trade basis OR Loss ratio + Expense ratio = Trade basis |
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