Fundamentals of Insurance exam Already Passed!!

Main purpose of Insurance - Allow the spread of risk Definition of Insurance - -Payment's made only when a certain peril has damaged the insured object -Payment's limited to actual amount of loss, no more and no less -There's no payment for losses that are deliberately caused by an insured. Five important points to the definition of insurance: - -Spread of Risk -Basis of Credit System -Eliminates Worry/Encourages Entrepreneurship -Loss Prevention and Loss Reduction -Source of Employment and Investment Capital Five important points as they relate to the definition of insurance: - -Provides a means of shifting one's financial responsibility for loss to another party -Payment made only in the event of the happening of a certain risk or peril -Payment restricted to amount required to indemnify insured -Covers losses to which the object of insurance 'may' be exposed -Indemnity can be in the form of money or other thing of value Three types of insurance included within the broad area of 'Property and Casualty Insurance': - -Auto Insurance -Property Insurance -Liability Insurance Two major types of insurers: Private Insurers - Stock Companies -operate via private funds or public sale of stock-main goal to generate profit for shareholders (owners) Mutual Companies -owned by its policy holders -main goal to provide insurance to its policy holders at as low a cost as possible -profits returned to policy via dividends or rate adjustments Two major types of insurers: Government Insurers - -Medical insurance -employment insurance -workers' compensation -mandatory auto insurance (Sask, BC, MB and QC) Three methods used by insurers to sell their products: Direct Writing System - -Salary or commission from employer (insurer) -Insurer owns all business -Insurer performs administrative functions Three methods used by insurers to sell their products: Independent Brokerage System - -Earn commissions from insurers -Brokerage owns all business -Provides client services for policy holders Three methods used by insurers to sell their products: Agency System - -Paid commissions/bonuses by insurers -Agents own their business Most common insurance distribution method in Canada: - -Independent Brokerage System