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Types of Life Insurers
  • stock company
  • mutual insurer
  • fraternal insurer
changing corporate structure of mutual insurers
  • increase in mergers and acquisitions
  • demutualization
  • mutual holding company
life insurance marketing
  • personal selling distribution systems
  • career agents
  • multiple line exclusive agency system
  • independent property and casualty agents
  • personal producing general agent
  • brokers
other distribution systems
  • financial institution distribution systems
  • direct response system
  • worksite marketing
  • stock brokers and financial planners
guiding principles in underwriting
  • standard group should predominate
  • balance within each class
  • equity among insured within each class
  • selection of insureds should be compatible with underlying mortality assumptions
sources of underwriting information
  • agent
  • applicant (application)
  • medical examiner
  • attending physicians
  • inspecition report
  • medical information bureau
factors affecting risk
  • age
  • build
  • physical condition
  • personal hisory
  • family history
  • occupation
  • residence
  • habits
  • morals
  • sex
  • plan of insurance
  • economic status
  • aviaiton activities
  • avocaiton
  • military service
methods of risk classification
  • judgment method
  • numberical rating systems
  • computers in underwriting
other methods of handling substandard risks
  • no coverage for first two years
  • graded death benefit
  • higher premiums policy
underwriting safeguards
  • limiting the amount of insurance
  • limiting the age of issue
  • limited to tandard risks
  • blood test if insurance is over certain
treatment of substandard risks
  • extra percentage tables
  • place substandard risks in different classes and charge higher premiums
  • suitable when the risk is expected to increase at an increasing rate
reinsurance
transferring all of part of the insurance to another insurer
direct writing or ceding company
company writing the business originally
reinsurer
insurer to whom the risk is transfered
retention
amount of insurance retained by the direct-writing company
automatic or treaty reinsurance
business is automatically reinsured
facultative reinsurance
direct-writing company shops around for reinsurance; each applicaiton is separately reveiwed by the insurer)
reasons for reinsurance
  • limit the amount of insurance on any life
  • take advantage of underwriting judgement of reinsurer
  • to transfer all or part of certain classes of business
  • reduce the drain on surplus from new business
  • stabilize the mortality experience
types of reinsurance plans
  • proportional reinsurance
  • yearly renewable term plan
  • coinsurance plan
  • modified coinsurance plan
purposes of regulation
  • maintain insurer solvency
  • inadequate consumer knowledge
  • ensure reasonable rates
  • make insurance available
sources of insurance regulation
  • state legislature
  • state insurance department
  • courts
  • national associaiton of insurance commissioners
what areas are regulated
  • formation and licensing of insurers
  • solvency regulation
  • policy forms
  • rate regulation
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