INS 24 | 351

Major roles of insurance - Risk management to deal with loss exposures; transfer system of financial loss from insured to insurer; business sufficient to pay claims and provide profit; contract between insured and insurer What are risk management techniques? - Loss prevention; loss reduction; risk transfer; loss avoidance Define Insurance Policy - A contract that states the rights and duties of both the insured and the insurer regarding the transfer and costs of losses. Define Exposure Units - Assets that are insured by an insurance company. What are the 2 insurance sectors? - Property-casualty and Life-health What % of premiums are from Property-casualty insurance? - 45% What do state insurance regulators review? - Insurance rates, policy forms, underwriting practices, claim practices, and financial performance. What are the primary sources of revenue for insurance companies? - Premiums and investment income. What costs besides loss payments do insurers incur? - Loss settlement expenses, new business acquisition, taxes and fees, investment expenses, and general expenses. Name the special characteristics of insurance policies. - Utmost good faith, contract of adhesion, contract of indemnity Define Utmost Good Faith - An obligation to act in complete honesty and to disclose all relevant facts. Define Contract of Adhesion - Any contract in which one party must either accept the agreement as written by the other party or reject it. Define Contract of Indemnity - A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of loss. If policy wording is ambiguous, who do the courts usually side with? - The insured. What are the 2 approaches to structuring an insurance policy? - Self-contained policy and Modular policies. Define Self-contained policy - A single document that contains all of the agreements between the insured and the insurer.