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XCEL Solutions - Basic Principles Review Questions and Answers 100% Solved
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XCEL Solutions - Basic Principles Review
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XCEL Solutions - Basic PrinciplesReview
Commercial Insurers (aka Private Insurance Companies) - answer- Sell for profit
- Multi-Line Insurer
- Two main groups: Stock and Mutual
Stock Companies - answer- Incorporated under state laws
- Purpose: Make a profit for stockholder
- Called "Nonparticipating Insurers"
- Stocked dividends are paid to stockholders
- Dividends are subject to taxation
Mutual Companies - answer- Owned by Policyholders
- Called "Participating Insurers"
- Mutual Company Dividends are payed to policyholders
- Dividends are NOT subject to taxation
- Accumulated interest on dividends is taxable
Mutualization - answerStock --> Mutual Insurer
Demutualization - answerMutual --> Stock Insurer
Mixed Insurer - answer- Operates as both a participating and non-participating insurer
- Dividends are NEVER guaranteed
Strong Assessment Mutual Companies - answerClassified by the way premiums are
charged:
Pure Assessment Mutual Company
- Based on loss sharing
- No premium payable in advance
- Each member assessed an individual portion of losses that occur
Advance Premium Assessment Mutual Company
- Charges premium at beginning of policy period
- Any surplus is returned to policyholders as dividends
- Additional assessments levied against members if total premiums aren't enough to
meet losses
- Amount of assessment levied is limited either by state-law or insurer's by-laws,
normally
, Fraternal Benefit Societies - answer- Type of Mutual Company, nonprofit religious,
ethnic or charitable organizations
- Provide insurance solely to their members
- Fraternal must be formed for reasons other than obtaining insurance
Risk Retention Groups - answer- Type of Mutual Company
- Formed by a group of people from the same industry/profession
- Eg: Pharmacists, dentists, engineers, etc.
Service Providers - answer- Offer benefits in return for payment of premiums
- Packaged into various plans
- Those who purchase plans are known as "suscribers"
- Eg: HMO/PPO
Reciprocal Insurers - answer- Unincorporated groups of individual members
- Provide insurance for other members through indemnity contracts
- Each member acts as both insurer and insured
- Managed by Attorney in Fact
Reinsurers - answer- Make arrangements with other insurance companies
- Arrangements made for purpose of transferring a portion of their risk to the reinsurer
- Company transferring the risk: "Ceding Company"
- Company assuming the risk: "Reinsurer"
Captive Insurer - answer- Established and owned by the parent company
- Insures the parent company's loss exposure
Home Service Insurers (aka Industrial Insurance) - answer- Sold by home service or
debt life insurance companies
- Face amounts are small ($1,000-$2,000)
- Premiums paid weekly
Government Insurance - answer- Federal and State Government are also insurers
- Provide social insurance programs
- Protect against universal risks by redistributing income to help people who can't afford
the cost of incurring such losses
- Millions are dependent on these services:
*Social Security
*MediCARE (for care to elderly)
*MedicAID (for aid to financially burdened)
*SGLI/VGLI (military insurance - active and retired)
* Tri-Care (for members of military and their family)
Self Insurers - answer- Retain risks and must have a large number of similar risks and
enough capital to pay claims
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