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Ch13 - fall 2014
insurers and agency systems
| Question | Answer |
|---|---|
| Mutual insurer | Insurance company owned by the policy owners, who elect the board of directors. The board appoints managing executives, and the company may pay a dividend or give a rate reduction in advance to insureds. |
| Advance premium mutual | Mutual insurer that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses |
| assessment mutual | Mutual insurer that has the right to collect additional money (above charged premiums) from policy owners for higher than expected losses and expenses |
| agent | Someone who legally represents the insurer, has the authority to act on the insurer’s behalf |
| broker | Often used to help companies find insurance, brokers legally represents the insured. They are still compensated by the insurer who wins the business |
| Agency building system | Including the general agency system and the managerial system, it is used in life insurance by which an insurer builds its own agency force by recruiting, financing, training, and supervising new agents |
| general agency system | Agency building system in which the general agent is an independent businessperson who represents only one insurer and is responsible for hiring, training, and motivating new agents |
| managerial system | Agency building system where branch offices are established and the branch manager is an employee of the company with the responsibility of hiring and training new agents. The expenses of the office are paid by the insurer. |
| demutualization | The conversion of a mutual insurer into a stock insurer |
| direct response system | A method where insurance is sold without the services of an agent; potential customers are solicited by media advertisements |
| fraternal insurer | a type of mutual insurer that provides life and health insurance to members of a social organization |
| Independent agency system | A system in which the agent is an independent businessperson representing several insurers. |
| Lloyd’s of London | Starting as a coffee shop, it is now the world’s leading insurance market that provides services and physical facilities for its members to write specialized lines of insurance |
| Non-admitted insurer | Insurer used only when insurance cannot be obtained from an admitted insurer |
| Reciprocal exchange | an unincorporated mutual in which insurance is exchanged among members and which is managed by an attorney-in-fact |
| stock insurer | An insurance corporation owned by stockholders |
| Non-building agency system | System by which a life insurer sells its products, not by building its own system of agents, but rather through established agents who are already engaged in selling life insurance or similar products |
| Personal producing general agent | An above-average salesperson with a proven sales record who is hired primarily to sell life insurance under a contract that provides commissions |
| Surplus line broker | Specialized broker licensed to place business with a non-admitted insurer |
Created by:
isufil250
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