PDF Insurance Handbook

Insurance Handbook

A guide to insurance: what it does and how it works

Insurance Handbook

A guide to insurance: what it does and how it works

?2010 Insurance Information Institute. 978-0-932387-47-9

Insurance Information Institute 110 William Street New York, NY 10038 Tel. 212-346-5500. Fax. 212-732-1916.

President ? Robert P. Hartwig, Ph.D., CPCU ? bobh@ Executive Vice President ? Cary Schneider ? carys@ Senior Vice President ? Public Affairs ? Jeanne Salvatore ? jeannes@ Senior Vice President and Chief Economist ? Steven N. Weisbart, Ph.D., CLU ?

stevenw@

Research Vice President ? Global Issues ? Claire Wilkinson ? clairew@

Publications Vice President ? Publications and Information Services ? Madine Singer ? madines@ Managing Editor ? Neil Liebman ? neill@ Research and Production ? Mary-Anne Firneno ? mary-annef@ Director ? Technology and Web Production ? Shorna Lewis ? shornal@ Production Assistant ? Katja Charlene Lewis ? charlenel@ Information Specialist ? Alba Rosario ? albar@ Special Consultant ? Ruth Gastel, CPCU ? ruthg@

Media New York:

Vice President ? Media Relations ? Michael Barry ? michaelb@ Vice President ? Web and Editorial Services ? Andr?a C. Basora ?

andreab@ Vice President ? Communications ? Loretta Worters ? lorettaw@

Web/Media Producer ? Justin Shaddix ? justins@

West Coast: Insurance Information Network of California:

Executive Director ? Candysse Miller ? cmiller@ Tel. 213-624-4462. Fax. 213-624-4432.

Northern California: Communications Specialist ? Tully Lehman ? tlehman@ Tel. 925-300-9570. Fax. 925-906-9321.

Representatives Davis Communications ? William J. Davis, Atlanta ? billjoe@ Tel. 770-321-5150. Fax. 770-321-5150. Hispanic Press Officer ? Elianne Gonz?lez, Miami ? elianneg@ Tel. 954-389-9517. Florida Representative ? Lynne McChristian, Tampa ? lynnem@ Tel. 813-480-6446. Fax. 813-915-3463.

Insurance Handbook

A guide to insurance: what it does and how it works

?2010 Insurance Information Institu?te. 978-0-932387-47-9

To The Reader

For over 50 years, the Insurance Information Institute (I.I.I.) has provided information to help consumers, reporters, insurance companies and researchers understand how insurance works and what it does. The Insurance Handbook is the latest addition to I.I.I.'s vast arsenal of resources, including books, brochures, newsletters and videos.

Long a primary source of information, analysis and referral on property/casualty insurance issues, the I.I.I. has broadened its reach over the years. Today, the I.I.I. is also a leading source for clear, comprehensive information on annuities, retirement and other life/health insurance concerns. The Insurance Handbook reflects this diversity of subjects and issues.

The book begins with basic information on the various types of insurance, including auto, home, life, annuities and long-term care. A glossary section contains over 500 entries, including over 100 life insurance definitions provided by LOMA, a worldwide association of life and financial services companies. A directory lists a wide range of insurance organizations, including national, state and specialty associations. Issues briefs provide overviews of the trends and developments shaping the insurance industry from natural catastrophes to terrorism to workplace safety.

The Handbook is designed to be used in conjunction with the Institute's other information resources: our Web site (), which provides comprehensive information on all aspects of insurance, and our various publications, including the Insurance Fact Book, the Financial Services Fact Book and A Firm Foundation: How Insurance Supports the Economy.

Its scope and clarity make it an ideal source for a wide variety of audiences, including:

? Reporters ? Public policymakers ? Regulators ? Students ? Insurance company employees ? Academics We believe this Handbook will prove a source of vital information to the media and others who have long relied on the I.I.I.'s spokespersons and resources for creditable, timely information. We appreciate your comments.

Robert Hartwig, Ph.D., CPCU President Insurance Information Institute

Contents

Insurance Basics ..............................................................................1

Overview

1

Auto Insurance

3

Homeowners Insurance

5

Business Insurance

10

Life Insurance

16

Annuities

19

Long-Term Care Insurance

22

Disability Insurance

24

Insurance Topics ........................................................................... 27

Captives and Other Risk-Financing Options

29

Catastrophes: Insurance Issues

32

Cellphones and Driving

34

Climate Change: Insurance Issues

35

Credit Scoring

39

Earthquakes: Risk and Insurance Issues

43

Financial and Market Conditions

45

Flood Insurance

47

Insurance Fraud

50

The Liability System and Medical Malpractice

Insurance Issues

52

Microinsurance

54

No-Fault Auto Insurance and Other Auto Liability Systems 55

Regulation

57

Reinsurance

60

Residual Markets

62

Terrorism Risk and Insurance

69

Workers Compensation

73

Glossary ......................................................................................... 78

Directories ...................................................................................128

Property/Casualty Insurance Industry Organizations

128

Life/Health Insurance Industry Organizations

132

Financial Services Industry Organizations

134

Agents and Brokers

141

Regulatory/Legislative Organizations

142

Educational Organizations

143

Specialty Organizations

145

Actuarial/Accounting

145

Adjusters

146

Alternative Markets

146

Auto/Auto Insurance

146

Automation and Claims Services

147

Aviation

147

Community Development

147

Crime/Fraud

147

Crop Insurance

148

Flood Insurance

149

International

149

Legal Issues and Services

152

Marine and Ground Transportation

152

Medical Malpractice/Professional Liability

153

Nuclear Insurance

153

Professional

153

Property Insurance Plans

154

Reinsurance

154

Risk Management

154

Safety/Disaster Mitigation

155

Surety, Financial Guaranty and Mortgage

157

Title Insurance

158

Weather

158

Workers Compensation

158

Research and Ratings Organizations

159

Alphabetical Index of Associations..........................................162

State Organizations ...................................................................166

Brief History ................................................................................190

I.I.I. Resources .............................................................................193

I.I.I. Member Companies ............................................................195

I.I.I. Staff ............................................................... Inside back cover

InBsausriacnsce

Overview

The insurance industry safeguards the assets of its policyholders by transferring risk from an individual or business to an insurance company. Insurance companies act as financial intermediaries in that they invest the premiums they collect for providing this service. Insurance company size is usually measured by net premiums written, that is, premium revenues less amounts paid for reinsurance. There are three main insurance sectors: property/casualty, life/health and health insurance. Property/casualty (P/C) consists mainly of auto, home and commercial insurance. Life/health (L/H) consists mainly of life insurance and annuity products. Health insurance is offered by private health insurance companies and some L/H and P/C insurers, as well as by government programs such as Medicare.

Regulation All types of insurance are regulated by the states, with each state having its own set of statutes and rules. State insurance departments oversee insurer solvency, market conduct and, to a greater or lesser degree, review and rule on requests for rate increases for coverage. The National Association of Insurance Commissioners develops model rules and regulations for the industry, many of which must be approved by state legislatures. The McCarran-Ferguson Act, passed by Congress in 1945, refers to continued state regulation of the insurance industry as being in the public interest. Under the 1999 Gramm-Leach-Bliley Financial Services Modernization Act, insurance activities--whether conducted by banks, broker-dealers or insurers--are regulated by the states. However, there have been, and continue to be, challenges to state regulation from some segments of the federal government as well as from some financial services firms.

I.I.I. Insurance Handbook insurancehandbook 1

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