Instructor’s Manual with Transparency Masters to accompany Introduction to Risk Management and Insurance, 7E - Dorfman © 2002 by Prentice Hall, Inc. A

Instructor’s Manual with Transparency Mastersto accompany Introduction to Risk Management and Insurance, 7E - Dorfman

© 2002 by Prentice Hall, Inc.A Simon & Schuster CompanyUpper Saddle, NJ 07458 1

Chapter 5:Chapter 5:Insurance OccupationsInsurance Occupations



INSURANCE OCCUPATIONSINSURANCE OCCUPATIONS Insurance AgentInsurance Agent Loss AdjusterLoss Adjuster UnderwriterUnderwriter ActuaryActuary LawyerLawyer Other OccupationsOther Occupations



INSURANCE AGENTINSURANCE AGENT Usual link between the consumer and Usual link between the consumer and

the insurance company for the insurance company for personalpersonal lines.lines.

Commercial insurance often involves Commercial insurance often involves brokers.brokers.

The agency relationship is controlled by The agency relationship is controlled by agency lawagency law



LAW OF AGENCY (LAW OF AGENCY (Common LawCommon Law)) AgentAgent is a person authorized to act on behalf is a person authorized to act on behalf

of another person (principal).of another person (principal). Duties of the agent:Duties of the agent:

LoyaltyLoyalty Duty not to be negligentDuty not to be negligent Duty to obey instructionsDuty to obey instructions

Duties of the principal:Duties of the principal: Pay the agent for services renderedPay the agent for services rendered Meet other contractual obligations (training, Meet other contractual obligations (training,

expense reimbursement, etc.)expense reimbursement, etc.)



Agent’s AuthorityAgent’s Authority Agents receive authority from principals in Agents receive authority from principals in

several waysseveral ways Agency agreement (contract)Agency agreement (contract) RatificationRatification Apparent authorityApparent authority

Scope of authority can be established in the Scope of authority can be established in the Agency Agreement - contract between agent Agency Agreement - contract between agent and the companyand the company

Agency agreement spells out extent of Agency agreement spells out extent of authority and all the contract particularsauthority and all the contract particulars..



Types of Insurance AgentsTypes of Insurance Agents In Property and LiabilityIn Property and Liability

When limited to soliciting business - called When limited to soliciting business - called "special" or "soliciting" agent"special" or "soliciting" agent

When agent able to bind principal then called When agent able to bind principal then called "general agent""general agent"

In Life InsuranceIn Life Insurance Insurance agents are soliciting agents because Insurance agents are soliciting agents because

they do not have the power to bind.they do not have the power to bind. General agents (branch managers) are hired to General agents (branch managers) are hired to

develop a geographic territory.develop a geographic territory.



Insurance BrokersInsurance Brokers Brokers also market insurance in both Brokers also market insurance in both

life and health and property and liability life and health and property and liability insuranceinsurance

Brokers do not have the power to bindBrokers do not have the power to bind Broker is agent of the consumer - not Broker is agent of the consumer - not

the companythe company



Comparison of Agents and BrokersComparison of Agents and Brokers

AGENCY RELATIONSHIPAGENCY RELATIONSHIP Consumer agent Consumer agent CompanyCompany

BROKERAGE RELATIONSHIPBROKERAGE RELATIONSHIP Consumer Consumer BrokerBrokerCompanyCompany

QUESTION: WHO DOES THE AGENT QUESTION: WHO DOES THE AGENT WORK FOR?WORK FOR?



DISTRIBUTION OF INSURANCEDISTRIBUTION OF INSURANCEProperty and LiabilityProperty and Liability

Direct Writers Independent Agents

•Employee /Agent usuallypaid by salary + Commission.•Lower Price•Standard Contracts

•Represents severalcompanies.•Own the business•Paid commissions•More service•Local help•Select company



DISTRIBUTION OF INSURANCE DISTRIBUTION OF INSURANCE Life InsuranceLife Insurance

Branch manager has control of territory and recruits and trains Branch manager has control of territory and recruits and trains soliciting or special agentssoliciting or special agents

Life insurance agents can never bind coverage - authority limited Life insurance agents can never bind coverage - authority limited power to bind remains at the home officepower to bind remains at the home office

General Agent orBranch Manager

Soliciting or Special Agents

Company



LOSS ADJUSTERSLOSS ADJUSTERSor Claims Investigatoror Claims Investigator

Loss adjusters make the product performLoss adjusters make the product perform Steps in adjusting a claimSteps in adjusting a claim

InvestigateInvestigate Determine if policy coversDetermine if policy covers Determine amount of the lossDetermine amount of the loss Pay the claimPay the claim

Independent Adjusters vs. Company Adjusters Independent Adjusters vs. Company Adjusters vs. Public Adjusters vs. Public Adjusters



LOSS ADJUSTERSLOSS ADJUSTERS QUESTION: Why do insurance agents and QUESTION: Why do insurance agents and

loss adjusters have to be very careful what loss adjusters have to be very careful what they tell insureds when they report a loss or they tell insureds when they report a loss or deal with them?deal with them?

Waiver - voluntary relinquishment of a know Waiver - voluntary relinquishment of a know right.right.

Estoppel - legal order to create consistent Estoppel - legal order to create consistent behavior.behavior.



UNDERWRITERUNDERWRITER Job is to accept exposures at appropriate rateJob is to accept exposures at appropriate rate Reject application if underwriting rules do not Reject application if underwriting rules do not

allow acceptanceallow acceptance Must be a skillful judge of peopleMust be a skillful judge of people Goal is to produce a group of insureds by Goal is to produce a group of insureds by

categories whose actual experience will categories whose actual experience will approach expected.approach expected.

Goal is NOT to reject people going to have Goal is NOT to reject people going to have losseslosses..



ACTUARYACTUARY Develops statistics and classifications Develops statistics and classifications

for insurance rates.for insurance rates. Reviews past and projected future Reviews past and projected future

results.results. Involved in product development.Involved in product development. Regulatory compliance issues.Regulatory compliance issues. Calculation of participating dividends.Calculation of participating dividends.



LAWYERLAWYER LawsuitsLawsuits Wording of insurance contractsWording of insurance contracts Deal with regulatory agenciesDeal with regulatory agencies General advice and counselGeneral advice and counsel



Other OccupationsOther Occupations Financial administratorsFinancial administrators AccountantsAccountants ArchitectsArchitects EngineersEngineers DoctorsDoctors Marketing, AdvertisingMarketing, Advertising Personnel AdministratorsPersonnel Administrators Computer System OperatorsComputer System Operators

Documents

Instructor’s Manual with Transparency Masters to accompany Introduction to Risk Management and Insurance, 7E - Dorfman © 2002 by Prentice Hall, Inc. A