Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
42 Cards in this Set
- Front
- Back
INSURANCE |
it is a way of sharing the losses of a few people among many. |
|
Insured |
the first party |
|
Insurer |
the second party |
|
People who claim against the policy are |
third party |
|
Insurable risk falls into three categories: |
1. personal, 2. property, 3. liability. |
|
Three classes of insurance: |
personal lines, commercial lines, special risks. |
|
Risk: |
can be eliminated reduced by using preventive methods by transferring it to an insurance policy. assuming the risk by waiting for the event to happen or retaining the risk by self-insuring. Large organization use this method. |
|
A pure premium |
is the premium required to meet the losses that occur. |
|
What is the primary function of insurance? |
Is to spread risk, however, there are a number of supplementary functions which also enhance the economy.
1. Spread of Risk - Insurers aim to achieve a balance of premiums to losses and expenses by having a good spread of risk. This can be achieved by: i. Volume - insuring a large number of risks ii. Diversity of type of risks - writing insurance on as many different kinds of risk as possible. iii. Diversity of location - writing insurance in as many different locations as practicable. 2. Aid to Security - Insurance gives peace of mind by substituting a certain premium payment in place of an uncertain loss payment. 3. Aid to Credit - It is virtually impossible to obtain credit without having insurance on the item concerned, for example a leased car or home mortgage. 4. Loss Prevention Activities - Insurers are not only in the business of spreading risk and paying losses when they arise, but also vitally interested in reducing or preventing losses. Some examples of loss prevention include: i. Fire Prevention ii. Safe Driving 5. Source of Capital - The insurance business invests large amount of money in the Canadian economy, in bonds and stocks and certain other securities, as well as buildings and land for their own use. 6. Source of Employment - The insurance industry is a source of employment for many Canadians who range from self-employed owners of insurance agencies or adjusters to employees who work in company offices of insurers, agents, brokers and adjuster |
|
Insurance is divided into two basic catergories: |
Life Insurance General Insurance |
|
Fire Insurance Policy
|
Includes cover for losses resulting from fire, lighting, and limited explosion |
|
Extended Coverage (E.C.) |
covers losses resulting from explosion, falling object, impact by aircraft or land vehicle, lighting damage to electrical appliances, riot, water escape, rupture, freezing, smoke, vandalism or malicious acts, wind storm and hail. |
|
Business Interruption |
covers loss of income while property insured under the Fire and E.C. insurance is being rebuilt or the business restored after a loss. |
|
Surety Bonds |
are usually required by contractors or by law as, for example, for various types of licencees, executors of estates, bonded warehouses |
|
Liability Insurance |
covers the entire spectrum from personal liability to liability resulting from ownership of premises, operations, products, rendering of professional services, libel, slander, and virtually any other situation where one individual might hold another responsible for some action or lack of action which resulted in injury or damage to that individual or his or her property. |
|
Automobile Insurance |
covers combinations of liability to third parties, bodily injury benefits to insureds as defined by the policy and damage to the insured automobile. |
|
Accident Insurance |
provides benefits for losses as a result of bodily injury. |
|
Crime Insurance |
(Burglary and Fidelity) covers loss resulting from various criminal activities. |
|
Floater |
refers to policies which cover items of property that are portable and could be found at different locations. There are numerous personal and commercial floaters. |
|
Commercial Property Floaters |
cover portable items of a commercial nature, such as Contractors equipment, electric and neon signs, installation floaters and livestock floaters. |
|
Inland Transportation |
provides coverage on goods in transit on land such as motor truck cargo, parcel post insurance, salesperson's samples and registered mail. |
|
Personal Articles and Personal Effects |
floaters provide coverage for specific properties and occasions, such as jewellery, televisions, fine arts, musical instruments, cameras and sports equipment. |
|
Home owners', Tenants', Condominium Unit Owners' . |
a few of the numerous package policies covering the property(building and contents) and liability of a private dwellings. |
|
Aviation |
covers aircraft of all types as well as liability associated with the operations of aircraft, airstrips and airfields. |
|
Marine |
covers both the hull(the vessel itself) and cargo |
|
Real Property |
covers instrumentalities of transportation and communication, such as dams, bridges, tunnels, pipelines and power transmission lines. |
|
Casualty Insurance |
It is applicable particularly to bodily and personal injury forms of insurance but generally also includes crime insurance, robbery, burglary, aviation, and in many instances surety bonding. |
|
There are four main points to consider when discussing the regulation of insurance agents/brokers: |
1. Qualification 2. Licensing 3. Operating Requirements 4. Renewal of Licence |
|
Generally, there are five areas of vital concern in the operation of an insurance agency or broker’s office: |
1. Finances, 2. Production, or Service 3. Marketing 4. Accounting, 5. Claims handling. |
|
Profit commission |
is extra commission paid annually to brokers/agents for business that produced a certain level of profitability for an insurer. Terms are stipulated in the agency/brokerage agreement. |
|
To ensure prompt and efficient service for Claims handling, brokers must inform: |
1. must inform the insurer of all losses, 2. appoint an adjuster promptly if their authority permits it, 3. use a follow-up system, 4. inform the exact coverage, 5. protect the client and insurer at all times. |
|
Insurers are divided into three basic groups: |
1. Organizations operating for profit of their owners such as stock companies and Lloyd's Underwriters. 2. Cooperative organizations operating for the benefit of their members only such as mutuals and reciprocals. 3. Government insurance organizations, which can take the form of a government department or a crown corporation. |
|
Who run Stock Companies? |
Shareholders |
|
Stock insurance companies achieve profit from two main sources: |
1. Underwriting gain, that is, excess of premiums collected over loss payments and expenses. 2. Interest on investments. |
|
Lloyd's is made up of : |
|
|
Marketing Department: |
1. Corresponds to the sales department. 2. Responsible for securing applications, for the flow of business into the company, promoting new types of policies. 3. Engaged in advertising, sales, appointing and training agents/brokers to represent the insurer. 4. Involved in sales promotion, providing assistance to agents/brokers and acting as liaison between the insurer and its agents/brokers. |
|
Underwriting Department: |
1. Select the risks, this means deciding which risks to reject and which ones to insure. 2. Accepting or rejecting a risk is based on personal information, details of exposures and special factors pertaining to the class or risk or type of insurance. 3. Acquires an understanding for the terms of use such as: retention, reinsurance, a line, risk, application and a fleet policy |
|
Claims Department : |
|
|
Accounting Department : |
|
|
Service Department : |
|
|
Statistical Department : |
|
|
Line: |
Classification of a catergory of insurance. |