CPCU 520 FINAL Exam Questions and Answers| New Update with 100% Correct Answers
Property-casualty insurers can be classified in 4 ways 1. Legal form of ownership
2. Place of Incorporation
3. Licensing status
4. Insurance distribution systems & channels
Legal Form of Ownership 1. Proprietary Insurers
2. Cooperative Insurers
3. Other Insurers
Proprietary Insurers 1. Stock insurers
2. Lloyd's of London (Lloyd's)
3. American Lloyds
4. Insurance Exchanges
Stock Insurers Insurers owned by their stockholders.
Lloyd's of London (Lloyd's) -Not an Insurer
-Provides the physical and procedural facilities for its members to write insurance.
American Lloyds -Smaller than Lloyds of London
-Members are called underwriters
Insurance Exchanges -Proprietary Insurer that acts as a marketplace.
-Members belong to Syndicate and delegate day-to-day operations to the syndicate manager.
Cooperative Insurers -Owned by it's policyholders
,1. Mutual Insurers
2. Pools
3. Government Insurers
4. Reciprocal Insurance Exchanges
5. Fraternal Organizations
6`. Other Cooperatives
Mutual Insurers -Policyholders are owners
-Elect the insurer's board of directions that appoints officers to manage the company
-Some profit is retained to increase surplus, and excess profit is usually returned to
policyholders as dividends.
Reciprocal Insurance Exchanges -Subscribers/Members of the group insure each other
-Managed by an attorney-in-fact.
Fraternal Organizations -Resemble Mutual Companies
-Primarily Life & Health Insurance
Other Cooperatives -Captive Insurers
-Risk Retention Groups
-Purchasing Groups
Captive Insurer (Captives) -Organization/group of affiliated organizations forms a subsidiary
company to provide all/part of it's insurance a Captive is it's subsidiary. AKA- "Formalized Self-
Insurance".
Other Insurers -Pools
-Government Insurers
,Pools -Consist of several insurers, not otherwise related, that join together to insure loss
exposures that individual insurers are unwilling to insure.
-Auto Liability Insurance & Workers Comp Coverage.
Government Insurers -NFIP: National Flood Insurance Program administered by the Federal
Insurance Administration under the
-FEMA: Federal Emergency Management Agency
(FAIR) Fair Access to Insurance Requirements -plans make property insurance more redily
available to property owners who have exposures to loss over which they have no control.
Place of Incorporation -Insurance is regulated at the state level
-Foreign Insurers
-Domestic Insurers
-Alien Insurers
Foreign Insurer -is a domestic insurer that is licensed to do business in states other than its
domiciled state.
Alien Insurers -incorporated or formed in another country.
Licensing Status -Admitted Insurer (Licensed)
-Non-admitted Insurer (Unlicensed)
Insurance Distribution Systems & Channels -designed to meet particular marketing
objectives
, Distribution Systems -Independent agency & brokerage marketing system
-Direct Writer Marketing System
-Exclusive Agency Marketing System
Common Distribution Channels - The internet
- Call Centers
- Direct Response
- Group Marketing
- Financial Institutions
Insurers have 5 major goals -Earn a profit
-Meeting customer needs
-Comply with Legal Requirements
-Diversify Risk
-Fulfill their duty to Society
Meet Customer Needs -determine what customers need and what price is competitive and
finding the best way to satisfy those needs
-Customers expect prompt service and timely responses to inquiries
-quick and professional assistance requires well-trained, customer-focused personnel and
automated support systems.
-Meeting customer needs can conflict with profit goal
-high-quality insurance at a price that the customer can afford may not generate the profit the
insurer needs to attract and retain capital.
-providing training, operating automated call centers, and maintaining current information
technology can also become costly and can conflict with achieving the profit goal.
Comply with legal requirements -Lack of compliance can lead to fins and penalties
Property-casualty insurers can be classified in 4 ways 1. Legal form of ownership
2. Place of Incorporation
3. Licensing status
4. Insurance distribution systems & channels
Legal Form of Ownership 1. Proprietary Insurers
2. Cooperative Insurers
3. Other Insurers
Proprietary Insurers 1. Stock insurers
2. Lloyd's of London (Lloyd's)
3. American Lloyds
4. Insurance Exchanges
Stock Insurers Insurers owned by their stockholders.
Lloyd's of London (Lloyd's) -Not an Insurer
-Provides the physical and procedural facilities for its members to write insurance.
American Lloyds -Smaller than Lloyds of London
-Members are called underwriters
Insurance Exchanges -Proprietary Insurer that acts as a marketplace.
-Members belong to Syndicate and delegate day-to-day operations to the syndicate manager.
Cooperative Insurers -Owned by it's policyholders
,1. Mutual Insurers
2. Pools
3. Government Insurers
4. Reciprocal Insurance Exchanges
5. Fraternal Organizations
6`. Other Cooperatives
Mutual Insurers -Policyholders are owners
-Elect the insurer's board of directions that appoints officers to manage the company
-Some profit is retained to increase surplus, and excess profit is usually returned to
policyholders as dividends.
Reciprocal Insurance Exchanges -Subscribers/Members of the group insure each other
-Managed by an attorney-in-fact.
Fraternal Organizations -Resemble Mutual Companies
-Primarily Life & Health Insurance
Other Cooperatives -Captive Insurers
-Risk Retention Groups
-Purchasing Groups
Captive Insurer (Captives) -Organization/group of affiliated organizations forms a subsidiary
company to provide all/part of it's insurance a Captive is it's subsidiary. AKA- "Formalized Self-
Insurance".
Other Insurers -Pools
-Government Insurers
,Pools -Consist of several insurers, not otherwise related, that join together to insure loss
exposures that individual insurers are unwilling to insure.
-Auto Liability Insurance & Workers Comp Coverage.
Government Insurers -NFIP: National Flood Insurance Program administered by the Federal
Insurance Administration under the
-FEMA: Federal Emergency Management Agency
(FAIR) Fair Access to Insurance Requirements -plans make property insurance more redily
available to property owners who have exposures to loss over which they have no control.
Place of Incorporation -Insurance is regulated at the state level
-Foreign Insurers
-Domestic Insurers
-Alien Insurers
Foreign Insurer -is a domestic insurer that is licensed to do business in states other than its
domiciled state.
Alien Insurers -incorporated or formed in another country.
Licensing Status -Admitted Insurer (Licensed)
-Non-admitted Insurer (Unlicensed)
Insurance Distribution Systems & Channels -designed to meet particular marketing
objectives
, Distribution Systems -Independent agency & brokerage marketing system
-Direct Writer Marketing System
-Exclusive Agency Marketing System
Common Distribution Channels - The internet
- Call Centers
- Direct Response
- Group Marketing
- Financial Institutions
Insurers have 5 major goals -Earn a profit
-Meeting customer needs
-Comply with Legal Requirements
-Diversify Risk
-Fulfill their duty to Society
Meet Customer Needs -determine what customers need and what price is competitive and
finding the best way to satisfy those needs
-Customers expect prompt service and timely responses to inquiries
-quick and professional assistance requires well-trained, customer-focused personnel and
automated support systems.
-Meeting customer needs can conflict with profit goal
-high-quality insurance at a price that the customer can afford may not generate the profit the
insurer needs to attract and retain capital.
-providing training, operating automated call centers, and maintaining current information
technology can also become costly and can conflict with achieving the profit goal.
Comply with legal requirements -Lack of compliance can lead to fins and penalties
