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Questions and Answers
What is the primary purpose of an insurance company?
What type of insurance company is owned by policyholders who share the profits and losses?
What is the process of evaluating and selecting risks to insure?
Which type of insurance provides a death benefit to beneficiaries?
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What is the study of risk and uncertainty to determine insurance rates and payouts?
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What is the process of identifying and mitigating risks to minimize losses?
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What is the purpose of reinsurance in the insurance industry?
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What is the term for adhering to laws and regulations governing the insurance industry?
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Study Notes
Definition and Purpose
- An insurance company is a business that provides financial protection to individuals and organizations against uncertain losses or damages in exchange for a premium.
- The primary purpose of an insurance company is to manage and mitigate risk by pooling and distributing risk among policyholders.
Types of Insurance Companies
- Stock Insurance Company: Owned by shareholders who invest in the company to earn a profit.
- Mutual Insurance Company: Owned by policyholders who share the profits and losses.
- Reciprocal Insurance Company: A type of mutual company where policyholders are also the owners.
- Captive Insurance Company: A subsidiary of a larger company that provides insurance coverage to its parent company.
Key Functions
- Underwriting: The process of evaluating and selecting risks to insure.
- Policy Issuance: Creating and issuing insurance policies to clients.
- Claims Processing: Handling and settling insurance claims.
- Investments: Investing premiums to generate income and reduce costs.
Insurance Products
- Life Insurance: Provides a death benefit to beneficiaries.
- Health Insurance: Covers medical expenses and hospitalization.
- Property Insurance: Covers damage to property, such as homes and vehicles.
- Liability Insurance: Protects against financial losses due to accidents or injuries.
Insurance Operations
- Actuarial Science: The study of risk and uncertainty to determine insurance rates and payouts.
- Risk Management: Identifying and mitigating risks to minimize losses.
- Reinsurance: Insuring insurance companies to manage their risk exposure.
- Regulatory Compliance: Adhering to laws and regulations governing the insurance industry.
Insurance Company Definition and Purpose
- An insurance company provides financial protection to individuals and organizations against uncertain losses or damages in exchange for a premium.
- The primary purpose of an insurance company is to manage and mitigate risk by pooling and distributing risk among policyholders.
Types of Insurance Companies
- Stock Insurance Company: owned by shareholders who invest in the company to earn a profit.
- Mutual Insurance Company: owned by policyholders who share the profits and losses.
- Reciprocal Insurance Company: a type of mutual company where policyholders are also the owners.
- Captive Insurance Company: a subsidiary of a larger company that provides insurance coverage to its parent company.
Key Functions
- Underwriting: evaluating and selecting risks to insure.
- Policy Issuance: creating and issuing insurance policies to clients.
- Claims Processing: handling and settling insurance claims.
- Investments: investing premiums to generate income and reduce costs.
Insurance Products
- Life Insurance: provides a death benefit to beneficiaries.
- Health Insurance: covers medical expenses and hospitalization.
- Property Insurance: covers damage to property, such as homes and vehicles.
- Liability Insurance: protects against financial losses due to accidents or injuries.
Insurance Operations
- Actuarial Science: studying risk and uncertainty to determine insurance rates and payouts.
- Risk Management: identifying and mitigating risks to minimize losses.
- Reinsurance: insuring insurance companies to manage their risk exposure.
- Regulatory Compliance: adhering to laws and regulations governing the insurance industry.
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Description
Learn about the definition and purpose of insurance companies, including the two main types: stock and mutual insurance companies.
