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ALABAMA PERSONAL LINES EXAM
Physical Hazard The hazard can be seen
moral hazard dishonesty
Morale Hazard carelessness
STARR
Sharing
Transfer
Method of handling risk
Avoidanc
e
Retentio
n
Reductio
n
contract (policy) an agreement between the insured and the insurer
1st party Insured (customer)
2nd party insurer, insurance company
Law of Large Numbers the large the group, the more accurately losses can be predicted
CANHAM: Calculable, affordable, Non-catastrophic,
Elements of an Insurable Risk
Homogenous (similar exposures), Accidental, Measurable
Adverse Selection risks that have a greater than average chance of loss
an insurance company (the ceding company) paying
Reinsurance another insurance company (reinsurer) to take some of
the companies risk of catastrophic loss
Stock Insurer a corporation owned by stockholders
An insurer that is owned by its policyholders and formed
Mutual Insurer
as a corporation for the purpose of providing insurance
to them.
provides insurance and other benefits
Fraternal Insurer
must be a member of the society to get the benefits
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-unincorporated
-members are assessed the amount they have to pay if a
reciprocal insurer
loss to any member of the group occurs
-run by an attorney-in-fact
Lloyd's Association insurance provided by individual underwriters not companies
A liability insurance company owned by its members,
Risk Retention Group which are exposed to similar liability risks by virtue of
being in the same business or industry.
Self-insurance a business that pays its own claims
provides residual market insurance- insurance from the
Federal Government
state or federal government
domestic the state where a company is incorporated
foreign company is incorporated in another state or U.S. territory
Certificate Authority state license for an insurance company
state requires the insurance company to have a
Admitted or Authorized
certificate of authority
An insurance company not required to have a certificate
Nonadmitted Insurer
of authority from the state
ALABAMA PERSONAL LINES EXAM
Physical Hazard The hazard can be seen
moral hazard dishonesty
Morale Hazard carelessness
STARR
Sharing
Transfer
Method of handling risk
Avoidanc
e
Retentio
n
Reductio
n
contract (policy) an agreement between the insured and the insurer
1st party Insured (customer)
2nd party insurer, insurance company
Law of Large Numbers the large the group, the more accurately losses can be predicted
CANHAM: Calculable, affordable, Non-catastrophic,
Elements of an Insurable Risk
Homogenous (similar exposures), Accidental, Measurable
Adverse Selection risks that have a greater than average chance of loss
an insurance company (the ceding company) paying
Reinsurance another insurance company (reinsurer) to take some of
the companies risk of catastrophic loss
Stock Insurer a corporation owned by stockholders
An insurer that is owned by its policyholders and formed
Mutual Insurer
as a corporation for the purpose of providing insurance
to them.
provides insurance and other benefits
Fraternal Insurer
must be a member of the society to get the benefits
, 2|Page
-unincorporated
-members are assessed the amount they have to pay if a
reciprocal insurer
loss to any member of the group occurs
-run by an attorney-in-fact
Lloyd's Association insurance provided by individual underwriters not companies
A liability insurance company owned by its members,
Risk Retention Group which are exposed to similar liability risks by virtue of
being in the same business or industry.
Self-insurance a business that pays its own claims
provides residual market insurance- insurance from the
Federal Government
state or federal government
domestic the state where a company is incorporated
foreign company is incorporated in another state or U.S. territory
Certificate Authority state license for an insurance company
state requires the insurance company to have a
Admitted or Authorized
certificate of authority
An insurance company not required to have a certificate
Nonadmitted Insurer
of authority from the state
