RMIN 4000 EXAM 2-SMITH STUDY GUIDE | 2026 | WITH
FULL SOLUTIONS
Types of private insurers - Answers -•Stock insurers
•Mutual insurers
•Lloyd's of London
•Blue Cross and Blue Shield Plans
-Captive Insurers
-Fraternal insurers
Stock Insurers - Answers -a corporation owned by stockholders
-earn profit for stockholders by increasing stock value and paying dividends
Mutual Insurers - Answers -an insurance corporation owned by the policyholders
- do not issue stock, but rather raise capital through premium payments of policyholders
-profits distributed to policyholders by dividends or rate reductions
Lloyd's Corporation - Answers -
Advanced Premium Mutual - Answers -policyholders pay set premium upfront
Assessment Mutual - Answers -has the right to assess policyowners an additional
amount if the insurer's financial operations are unfavorable
Insurance Agent - Answers -person authorized to issue a bind to bind the principal to a
contract
Broker - Answers -represents insureds, usually business firms and large corporations
-may provide other risk management services
Surplus Lines Broker - Answers -A person or firm that places business with insurers not
licensed (nonadmitted) in the state in which the transaction occurs but that is permitted
to write insurance because coverage is not available through standard market insurers.
Managing General Agents - Answers -Specialized producers with underwriting
authority, can be involved in surplus lines
Types of Marketing Systems - Answers -1. Independent Agency System
2. Exclusive Agency System
3. Direct Writer
4. Direct Response System
5. Multiple Distribution System
, Independent Agency System - Answers -Agents represent several insurers through
signed contracts and are paid on commission or fee basis, not through salary.
Exclusive agency system - Answers -the agent represents only one insurer or group of
insurers under common ownership
Direct writer - Answers -Insurance marketing system where the company's agents are
also employees of the company
Direct response system - Answers -a marketing system by which insurance products
are sold directly to consumers without a face-to-face meeting with an agent
Multiple distribution system - Answers -Insurance system where more than one
distribution system is used to sell insurance.
Basic company functions - Answers -1. Ratemaking
2. Underwriting
3. Production
4. Claim settlement
5. Reinsurance
6. Investments
7. Other (accounting, legal, loss control, information systems)
Activities of actuaries - Answers -
Insurance binders - Answers -provide temporary insurance until policy is written
** cannot be issued by life insurance agents- full risk assessment must be done before
coverage is issued**
Underwriting - Answers -The process of reviewing, accepting or rejecting applications
for insurance.
Statement of underwriting policy - Answers -A _______________________________
establishes policies that are consistent with the company's objectives
Basic underwriting principles - Answers -1. Attain an underwriting profit
2. Select prospective insureds according to the company's underwriting standards
3. Provide equity among the shareholders
Additional sources of underwriting information - Answers -1. Application
2. Agent report
3. Inspection report
4. Physical inspection
5. Physical examination
6. Medical information bureau (MIB) report
FULL SOLUTIONS
Types of private insurers - Answers -•Stock insurers
•Mutual insurers
•Lloyd's of London
•Blue Cross and Blue Shield Plans
-Captive Insurers
-Fraternal insurers
Stock Insurers - Answers -a corporation owned by stockholders
-earn profit for stockholders by increasing stock value and paying dividends
Mutual Insurers - Answers -an insurance corporation owned by the policyholders
- do not issue stock, but rather raise capital through premium payments of policyholders
-profits distributed to policyholders by dividends or rate reductions
Lloyd's Corporation - Answers -
Advanced Premium Mutual - Answers -policyholders pay set premium upfront
Assessment Mutual - Answers -has the right to assess policyowners an additional
amount if the insurer's financial operations are unfavorable
Insurance Agent - Answers -person authorized to issue a bind to bind the principal to a
contract
Broker - Answers -represents insureds, usually business firms and large corporations
-may provide other risk management services
Surplus Lines Broker - Answers -A person or firm that places business with insurers not
licensed (nonadmitted) in the state in which the transaction occurs but that is permitted
to write insurance because coverage is not available through standard market insurers.
Managing General Agents - Answers -Specialized producers with underwriting
authority, can be involved in surplus lines
Types of Marketing Systems - Answers -1. Independent Agency System
2. Exclusive Agency System
3. Direct Writer
4. Direct Response System
5. Multiple Distribution System
, Independent Agency System - Answers -Agents represent several insurers through
signed contracts and are paid on commission or fee basis, not through salary.
Exclusive agency system - Answers -the agent represents only one insurer or group of
insurers under common ownership
Direct writer - Answers -Insurance marketing system where the company's agents are
also employees of the company
Direct response system - Answers -a marketing system by which insurance products
are sold directly to consumers without a face-to-face meeting with an agent
Multiple distribution system - Answers -Insurance system where more than one
distribution system is used to sell insurance.
Basic company functions - Answers -1. Ratemaking
2. Underwriting
3. Production
4. Claim settlement
5. Reinsurance
6. Investments
7. Other (accounting, legal, loss control, information systems)
Activities of actuaries - Answers -
Insurance binders - Answers -provide temporary insurance until policy is written
** cannot be issued by life insurance agents- full risk assessment must be done before
coverage is issued**
Underwriting - Answers -The process of reviewing, accepting or rejecting applications
for insurance.
Statement of underwriting policy - Answers -A _______________________________
establishes policies that are consistent with the company's objectives
Basic underwriting principles - Answers -1. Attain an underwriting profit
2. Select prospective insureds according to the company's underwriting standards
3. Provide equity among the shareholders
Additional sources of underwriting information - Answers -1. Application
2. Agent report
3. Inspection report
4. Physical inspection
5. Physical examination
6. Medical information bureau (MIB) report
