insurance institutions. i. introduction a. type of insurance 1. social insurance 2. private...
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TRANSCRIPT
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Insurance Institutions
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I. Introduction
A. Type of Insurance
1. Social Insurance
2. Private Insurance• American System
– Life Insurance
– Property/Casualty Insurance
• European System
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B. Risk
1. Outcome• Pure Risk
The outcome can only be a loss or no loss with no possibility for gain.
• Speculative Risk
Uncertainty about an event could result in either a gain or a loss.
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2. Insurability• Statistical Concepts
– Law of Large Numbers– Measurable Objective Risk
Objective risk is the deviation of actual losses from expected losses and can be measured statistically.
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• Commercial Insurability– Homogeneous exposure units
There is a large number of homogeneous exposure units so that losses can be predicted on the law of large numbers.
– Accidental and unintentional occurrence
The law of large numbers is based on randomness.
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– Identifiable circumstances of loss
The time, location, cause, and amount should be identifiable.
– Calculable probability of loss
The is required for the purpose of calculating premium.
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– Non-catastrophic loss
A large portion of the exposure units should not experience a loss at the same time.
– Affordable premium
This is to ensure a sizable market.
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II. Life Insurance Companies
A. Industry Structure1. Insurers• By Organizational Form
– Stock Life Insurance Companies– Mutual Life Insurance Companies– Fraternal Life Insurance Companies– Government Agencies– Mutual Savings Banks
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• By Reserve Requirement– Legal Reserve Companies– Assessment Insurance Companies
• By Reinsurance– Primary Companies (Ceding Companies)– Reinsurance Companies
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2. Distribution Network• Branch Offices• General Agencies• Direct Mail
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B. Financial Operations
1. Life Insurance Policies• By Purpose
– Risk
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– Term Insurance• Duration
1-year, 3-year, 5-year, 10-year• Face Amount
Constant term, decreasing term, increasing term
• Expiration Protection
Renewable term, convertible term
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– Risk/Investment• Endowment Life• Whole Life (Straight Life)• Variable Life• Universal Life• Variable Universal Life (Universal
Life II)• Single Premium Life
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PremiumDeathBenefit
CashValue
WholeLife
Fixedpremium
Fixed deathbenefit
Fixed cashvalue
VariableLife
Fixedpremium
Variablewithguaranteedminimum
Variablewithguaranteedminimum
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PremiumDeathBenefit
CashValue
UniversalLife
Variableexcept initialperiod
Variablewithguaranteedminimum
Variablewithguaranteedminimum
VariableUniversalLife
Variablepremium
Variablewithoutguaranteedminimum
Variablewithoutguaranteedminimum
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• By Market Segment– Individual Life (Ordinary Life)– Business Life– Group Life– Credit Life– Industrial Life (Home Service Life)
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• By Dividend Received– Participating Contract (rec. dividends)– Non-Participating Contract (no dividend)
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2. Annuity
3. Health Insurance
4. Investments• Corporate Bonds
• Mortgages
• Government Securities
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C. Regulations• National Association of Insurance
Commissioners (NAIC)
• Insurance Regulatory Information System
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III. Property/Casualty Insurance Companies
A. Industry Structure
1. Insurers• By Ownership
– Stock Companies– Mutual Companies– Reciprocals (Interinsurance Exchanges) – Domestic Lloyd
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• By Corporate Control– Independent Companies– Captive Companies
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• By Premium Assessment– Assessment Companies– Non-Assessment Companies
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• By Reinsurance– Primary Companies (Ceding Companies)– Reinsurance Companies
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2. Distribution Network• Branch Offices
• General Agencies
• Direct Mail
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B. Financial Operations
1. Property/Liability Policies• By Parties Covered
– First Person Insurance– Third Party Liability Insurance
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• By Pattern of Loss Payments– Short-Tailed Insurance Lines
– Long-Tailed Insurance Lines
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• By Risk Category– Property Insurance
• Named Peril Policies
A named peril policy cover perils that are specifically named, such as lightning, flood, theft, etc.
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• All-Risk Policies (Open Perils)
An all risk policy protect the insured against loss from all perils except those specifically excluded.
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– Liability Insurance– Marine Insurance
• Ocean Marine Insurance• Inland Marine Insurance
– Multiline Policies
A multiline policy contain both property and liability insurance coverages. Examples include homeowner’s policies and personal auto policies.
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– Surety Insurance– Fidelity Insurance
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2. Health Insurance
3. Investments• Corporate stocks• Revenue bonds• Corporate bonds• U. S. government securities
C. Regulations
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IV. Trends
A. Bancassurance• Cross-Sectoral Investing (i.e., crossing
industry lines)
• Interpenetration of Markets (i.e., merges and acquisitions)
• Cooperative Arrangement (i.e., cooperating between independent banks and insurance companies)
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B. Cross-Border Activities• Mergers and Acquisitions
• Branching
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V. Social Insurance
A. Institutions• Social Security Administration, Department
of Health and Human Services• Bureau of Employment Security,
Department of Labor• Bureau of Employees’ Compensation,
Department of Labor
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B. Financial Operations• Old-Age, Survivor, Disability, and
Health Insurance (OASDHI)
• Unemployment Insurance
• Worker’s Compensation