Intro to Property-Casualty Insurance Chp 5

studentdavid's version from 2016-11-29 21:44

Section 1

Question Answer
SolvencyAbility of the insurer to meet its financial obligations as they become due, even those arising from insured losses that may be claimed several years in the future
Alien InsurerInsurer domiciled in a country other than the US
Domestic InsurerAn Insurer doing business in the jurisdiction in which it is incorporated
Stock InsurerInsurer is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders
Mutual InsurerInsurer is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them

Section 2

Question Answer
Reciprocal Insurance Exchangecombination of insurer and insured, called subscribers that agree to insure one another and share profits and losses
Admitted InsurerAn insurer authorized and granted a license by state insurance dept to do business within that state
Nonadmitted Insurer An insurer not authorized by state insurance dept to do business within that state
Surplus Lines LawA state law that permits any producer with a surplus lines license issued by the state to obtain insurance from an eligible surplus lines insurer, only if applicant cannot obtain desired type of insurance in admitted market

Section 3

Question Answer
Mandatory Rate LawState law requires insurance rates to be set by a state agency or rating bureau and all licensed insurers are required to use those rates
Prior-Approval LawInsurance rating law requires rates and supporting rules to be filed and approved by state insurance dept before being used
File-and-Use LawInsurance rating law requires insurer to file rates and supporting rules with state insurance dept prior to their use, but the rates can be used immediately without specific approval
Use-and-File LawInsurance rating law requires rates to be filed with state insurance dept within specified period after they are put into use
Flex Rating LawInsurance rating law requires prior approval if new rates exceed a certain percentage above or below rates previously filed
Open Competition (no-file law)Insurance rating law allows insurers to develop and use rates without having to file with or get approval from state insurance dept

Section 4

Question Answer
Market Conduct RegulationRegulation of the practices of insurers in regard to four areas of operation :Sales practices, Underwriting practices, claims practices, and bad fait actions
Unfair trade practices lawState law that specifies certain prohibited business practices
Solvency SurveillanceProcess conducted by state insurance regulators, of verifying the solvency of insurers and determining whether their financial condition enables them to meet their financial obligations and to remain in business
National Association of Insurance CommissionersAssociation of insurance commissioners from the fifty states of US, District of Columbia, and the five U.S. territories and possessions, whose purpose is to coordinate insurance regulation activities among various state insurance depts.
NAIC Annual StatementThe primary financial statement prepared by insurers and required by every state insurance dept

Section 5

Question Answer
ReserveThe amount the insurer estimates and sets aside to pay on an existing claim not yet settled
Insurance Regulatory Information System (IRIS)An information and early warning system established and operated by the NAIC to monitor the financial soundness of insurers
Guaranty FundA state established fund that provides a system for the payment of some unpaid claims of insolvent insurers licensed in that state, usually funded by appraisals collected from all insurers licensed in the state