Key Concepts
Adverse Selection - Selection against the company. Tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others. Also, tendency of policyowners to take advantage of favorable options in insurance contracts.
Career Agency System - A method of marketing, selling and distributing insurance, it is represented by agencies or branch offices committed to the ongoing recruitment and development of career agents.
Certificate of Authority - Before any entity may operate as an insurer in this state, it must obtain a Certificate of Authority from the Office of Insurance Regulation.
Churning - The practice by which policy values in an existing life insurance policy or annuity contract are used to purchase another policy or contract with that same insurer for the purpose of earning additional premiums or commissions without an objectively reasonable basis for believing that the new policy will result in an actual and demonstrable benefit.
Fair Credit Reporting Act - 1970 federal law requiring an individual to be informed if he or she is being investigated by an inspection company.
Financial Services Modernization Act - 1999 Act eliminating the restriction placed on financial institutions, insurance companies, commercial banks, investment banks and retail brokerages from entering each other's line of business.
Fraternal Benefit Insurer - Nonprofit benevolent organization that provides insurance to its members.
Hazard - Any factor that gives rise to a peril.
HMO - Health Maintenance Organization - Health care management stressing preventive health care, early diagnosis and treatment on an outpatient basis. Persons generally enroll voluntarily by paying a fixed fee periodically.
Home Service Insurer - Insurer that offers relatively small policies with premiums payable on a weekly basis, collected by agents at the policyowner's home.
Independent Agency System - A system for marketing, selling and distributing insurance in which independent brokers are not affiliated with any one insurer but represent any number of insurers.
Law of Large Numbers - Basic principle of insurance that the larger the number of individual risks combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period.
Lloyd's of London - An association of individuals and companies that underwrite insurance on their own accounts and provide specialized coverages.
McCarran-Ferguson Act - 1945 Act exempting insurance from federal antitrust laws to the extent insurance is regulated by states.
Misrepresentation - Act of making, issuing, circulating or causing to be issued or circulated an estimate, illustration, circular or statement of any kind that does not represent the correct policy terms, dividends or share of the surplus or the name of title for any policy or class of policies that does not in fact reflect its true nature.
Misuse of Premiums - Improper use of premiums collected by an insurance producer.
NAHU - National Association of Health Underwriters - An organization of health insurance agents that is dedicated to supporting the health insurance industry and to advancing the quality of service provided by insurance professionals.
NAIC - National Association of Insurance Commissioners - Association of state insurance commissioners active in insurance regulatory problems and in forming and recommending model legislation and requirements.
NAIFA - National Association of Insurance and Financial Advisors - An organization of life insurance agents that is dedicated to supporting the life insurance industry and to advancing the quality of service provided by insurance professionals.
PPO - Preferred Provider Organization - Association of health care providers, such as doctors and hospitals, that agree to provide health care to members of a particular group at fees negotiated in advance.
Peril - The immediate specific event causing loss and giving rise to risk.
Personal Producing General Agency System - PPGA - A method of marketing, selling and distributing insurance in which PPGAs are compensated for business they personally sell and business sold by agents with whom they subcontract. Subcontracted agents are considered employees of the PPGA, not the insurer.
Pure Risk - Type of risk that involves the chance of loss only; there is no opportunity for gain; insurable.
Rebating - Returning part of the commission or giving anything else of value to the insured as an inducement to buy the policy. In some states, it is an offense by both the agent and the person receiving the rebate.
Reciprocal Insurer - Insurance company characterized by the fact its policyholders insure the risk of other policyholders.
Reinsurance (Reinsurer) - Acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.
Risk Pooling - A basic principle of insurance whereby a large number contribute to cover the losses of a few.
Risk Retention Groups - A form of mutual insurer that provides liability coverage to insure groups of individuals who are of the same group or class.
Self-Insurance (Self-Insurer) - Program for providing insurance financed entirely through the means of the policyowner, in place of purchasing coverage from commercial carriers.
Speculative Risk - A type of risk that involves the chance of both loss and gain; not insurable.
State Guaranty Associations - Established by each state to support insurers and protect consumers in the case of insurer insolvency, guaranty associations are funded by insurers through assessments.
Stock Insurers - Insurance company owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies.
Twisting - Practice of inducing a policyowner with one company to lapse, forfeit or surrender a life insurance policy for the purpose of taking out a policy in another company.
U.S. v. Southeastern Underwriters Association - 1944 ruling stating that insurance is a form of interstate commerce and therefore should be regulated by the federal governments.
Familiarize yourself with the Key Concepts in the Florida study manual, Units 1 and 2.
