Florida Insurance 2-15 Exam Terms/Answered/A+ Rated
Florida Insurance 2-15 Exam
Terms/Answered/A+ Rated
Insurance
Financial protection against loss
... [Show More] or harm - An arrangement by which company
gives customers financial protection against loss or harm such as theft or illness in
return for premium payments.
Life Insurance
Is based on actuarial or mathematical principles and guarantees a specified sum of
money upon the death of the person who is insured.
Health Insurance
Evolved from scientific principles to provide funds for medical expensed due to
sickness or injury and to cover loss of income during disability
Annuities
Provide a stream of income by making a series of payments to the annuitant for the
annuitant's lifetime or for a specifically designated period of time.
Risk
Uncertainty regarding loss; the probability of loss occurring for an insured or
prospect
Speculative Risks
Involve the possibility of loss and gain. (Not Insurable)
Pure Risks
Involve the possibility of loss only. (Insurable)
Peril
Cause of risk (when a building burns, fire is the peril)
Hazards
The source of danger
Physical Hazard
A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment.
(Blindness & deafness)
Risk Avoidance
Occurs when individuals evade risk entirely. "If you don't drive, then you avoid
getting in an auto accident."
Risk Reduction
Takes place when the chances of loss are lessened. Changing a lifestyle to
minimize a known risk.
Risk Retention
Being aware of the risks involved and taking precautions for financial protection.
Auto policy's deductible is an illustration of risk retention
Risk Transference
The act of shifting the responsibility of risk to another in the form of an insurance
contract.
Adverse Selection
Refers to the tendency for those individuals who present less favorable insurance
risk to seek or continue insurance to a great extent than other risks.
Insuring Pure Risk
Loss must be due to chance
Loss must be definite and measurable
Risk must be predictable
Loss must NOT be catastrophic
Exposure to loss must be large
Loss exposures must be randomly selected
Mutual Insurers
Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
Assessment Mutual Insurers
Prohibited in Florida
Pure Assessment Mutual Company
Don't pay premium and total loss is divided among members
Lloyds of London
NOT considered an insurance company
- An association of individuals and companies that individually underwriter
insurance.
Fraternal Benefit Societies
Must be nonprofit, have a lodge system, and offer insurance to its members only
Service Providers
Contract for and sell medical and hospital care services. Participants are known as
subscribers.
Home Service Insurer
Insurer that offers relatively small policies with premiums payable on a weekly
basis.
Captive Agents
A.k.a. Career agents
Works for only one insurer and sells only that insurers products
Independent Agents
Is self-governing and actually works for himself. This affords him the versatility to
represent several insurers and their different insurance products.
Special Agents
Usually not license and don't sell insurance. Assist insurance companies field
representatives.
Career Agency System
(GA) - Build sales staffs and agents are treated as employees. They are recruited
and trained. A principal of the company supervises agents.
Personal Producing General Agency System
(PPGA) - The agent supplies his own working environment. Agents hired by a
PPGA are considered employees of the PPGA, not the insurance company, and are
supervised by the regional salary.
Independent Agency System
Agents represent several insurers through signed contracts and are paid on
commission or fee basis, not through salary.
Regulating the business of insurance
Legislation
The Court System
State Insurance Departments
Paul v. Virginia
- State tried to control insurance domiciled from another state.
- U.S. Supreme Court sided against insurance company
- Upholding the right of sate to regulate insurance
- States WIN
United States v. Southeastern Underwriters Association (SEUA)
- Ruling is a form of interstate commerce
- Should be regulated by the federal government
- Fed Gov. WINS
The McCarran-Ferguson Act
- Gave back some regulatory authority to the states
- Did not provide the states to regulate individually
- Insurance regulated by state law "is in the publics best interest"
Intervention by the FTC
- FTC tried to control the advertising and sales literature used by the health
insurance industry
- Thus, supreme court held that the McCarran-Ferguson Act disallowed this
- FTC tried even harder to force more federal control
Intervention by SEC
- Dealing with variable annuities
- Securities and Exchange Commission (SEC) should regulate the variable
annuities (since they're used for investments) & variable life insurance.
- Therefore, agents must obey the rules to both SEC and state regulation.
Fair Credit Reporting Act
- Fair and accurate report of information about consumers
- Insurers must inform them about any investigations being made
- Then insurers must let the applicants know the name of the reporting agency
Financial Services Modernization Act
- Revoking the Glass-Steagall Act
- This changed the industry so commercial banks, investment banks, retail
brokerages, and insurance companies can now enter each other's lines of business
Admitted insurance company
- Office of Insurance Regulation has licensed them to carry out business in Florida
Nonadmitted Insurance Company
- Have not been licensed by the the Florida Office of Insurance Regulation
HMO
Health Maintenance Organization
- Health care management stressing preventive health care, early diagnosis and
treatment on an outpatient basis
Policy Replacement
- An action which eliminates the original policy or diminishes its benefits or values
Bad policy remplacement issues
- Most the first year's premium is consumed by the commission
- The premium is higher due to the insured's advanced age
- Waiting periods begin anew
Misuse of Premiums
- Improper use of premiums collected by an insurance producer
- Depositing a client's premium in own personal account
Rebating
- Florida and California are the only two states that allow rebating
- When any part of commission or anything else of value is given to the insured as
a incentive to buy a policy
- Agent must keep copies of rebating schedules for five years
NAIC
- National Association of Insurance Commissioners
- No legal power of its own
- Encourages uniformity in state insurance laws and regulations
Florida Insurance Guaranty Association [Show Less]