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CHAPTER 6INSURANCE OCCUPATIONS

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INSURANCE AGENT The insurance agent is the link in the

marketing chain connecting the insurance company with the insurance consumer.

Agent: is authorised to act for another person

Principal is the person that an agent act on behalf.

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DUTIES OF AGENTS LOYALTY NOT TO BE NEGLIGENT OBEY INSTRUCTIONS INFORM PRINCIPAL RESAONABLE CARE

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AUTHORITY ACTUAL AUTHORITY is given to agents

form their principals. EXPRESS AUTHORITY provides details of

the agent’s duties and responsibilities., INCIDENTAL AUTHORITY is to do things

normally required to accomplish the specified acts accompanies express authority.

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INSURANCE AGENTS GENERAL AGENTS: have the authority fo

bind their principal to insurance contracts. SPECIAL OR SOLICITING AGENTS: have

the authority to solicit.

The principal is bound to agent’s actions. IF agents go beyond the scope of thier authority, substantial legal issue may be present.

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TWO FUNDAMENTAL DOCTRINES 1.Knowledge given the agent is

considered knowledge provided the principal

2. Payment made to the agent is considered payment conveyed to the principal when there is actual authority.

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INSURANCE BROKERS An insurance broker is an agent with the

limited to find an insurer willing to accept a transfer of the principal’s risk.

The principal is NOT the insurance company.

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ADVANTEGES-DISADVANTEGESThere is a possibility of both the principal on the broker do not pass along the facts to the insurer.There is a possibility of the fact that the insurance contract can be voided because of concelement of material facts.

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BROKER Broker can not bind insurer to contracts.

Some brokers are licenced as agents and have the capacity to bind authority from a particular insurer. However, this is outlawed.

The duties fo principal are the same as agents.

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BROKER The broker earns a commission as a

percentage of the premium charged the principal.

The Dillema:The principal’s choice would be

served by the lower cost insurer but the broker’s interest would be met by the higer-cost insurer.

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BROKER The brokers are especially useful in

commercial insurance. Business firms have unique properties or liablity exposures and require insurance contracts writtten to their ows specifications.

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BROKERS1. GENERAL BROKER

2. A SURPLUS LINES BROKER

3. A LLOYD’S AUTHORISED BROKER

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INDEPENDENT AGENCY SYSTEM

They represent several different insurance companies.

The independent agent may place a client’s homeowner’s insurance with one company and the same client’s automobile insurance with another company.

They earn only commission .

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EXCLUSIVE AGENT OR DIRECT WRITING SYSTEM Insurers call property insurance companies

selling insurance through thier own employee-agents direct writers.

Exclusive agents are not employees of the insurer but agree to place all their business with one insurer.

Direct writing agents are employees of one insurer. They are paid salaries plus commission or bonus.

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LIFE INSURANCE AGENTS AND BROKERS Life insruance agent is under contract to

one company. Unlike the property agent representing

the direct writer, however, life insurance agent is not technically an employee of the company.

A contract between general agent and insurance company that specifies the anouthority and rights.

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LIFE INSURANCE AGENT`S DUTIES Simply sell and provide information on

insurance contract Inform clients, motivate to take a

specified course of action Provide service before and after losses Exercise judgement in selecting clients

for insurance company Must be familiar with social security and

other government benefits

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LOSS ADJUSTER(insurance investigator) After a loss, the insured must notify the

insurance company. The notice represents a CLAIM for

payment. Before settling the claim, the insurer

conduct an investigation. Investigation is done by a LOSS

ADJUSTER(claims auditor or claims agent)

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Loss Adjuster

In property insurance, this investigation is very important where losses are partial or the damage is not clear.

Life insurers use loss adjusters to investigate some claims for accidental death benefits, disability income benefits and health insurance benefits.

Most of the work is done outside the office

In some cases only fire marshal`s report or police reports are needed.

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LOSS ADJUSTER Sometimes the adjuster may determine

for a fact that fraud by an insured was involved in the loss. Such as faked accidents, business and vechile arsons etc.

Sometimes insured and adjuster cannot agree on the amount of the claim. If the claim is denied and then the

insured can hire a lawyer and sue the company for the breach of contract.

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LOSS ADJUSTER Insurance companies often use loss

adjusters who are not their own employees.

They hire the services of an independent adjuster or an independent adjustment bureau.

Independent adjusters are hired when loss needs specialization.

Independent adjusters are agents of insurer , a public adjuster is an agent of the insured.

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UNDERWRITER Reviews applications for insurance and

then either accepts them at an appropriate rate or rejects them

Makes decisiond based on criteria established by the company`s top management and personal experience and judgement.

Possibility of adverse selection

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ACTUARY

An insurance company mathematician who complies statistics of losses, develops insurance rates, calculates dividends and evaluates the financial standing of the insurance company.