Insurance Companies
Copyright 2014 by Diane Scott Docking
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Learning Objectives
• Understand the different types of
insurance companies
• Understand the various insurance
products offered by:
o
o
o
o
Life insurance companies
Property and casualty insurance companies
Health insurance companies
Other insurance companies
Copyright 2014 by Diane Scott Docking
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Types of Insurance Companies
• Life Insurance
• Property & Casualty Insurance
• Health Insurance
• Other
Copyright 2014 by Diane Scott Docking
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Purpose of Insurance
Companies
• The primary function of insurance companies is to
compensate policyholders if a pre-specified event
occurs, in exchange for premiums paid
o insurance underwriters assess and price risk
o insurance brokers sell insurance contracts
• Insurance is broadly classified into three broad groups
o life insurance policies provide protection against untimely
death or illness, and/or transfer wealth through time to
retirement
o property-casualty insurance protects against personal
injury and liability associated with specific events
o health insurance protects against medical conditions
• Insurance companies also sell a variety of investment
products similar to other financial institutions.
Copyright 2014 by Diane Scott Docking
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Life Insurance
• Ordinary Life
o Term life
o Whole life
o Endowment life
o Variable life
o Universal life
o Variable Universal life (VUL)
• Group Life
• Credit Life
Copyright 2014 by Diane Scott Docking
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Life Insurance
• Ordinary life insurance is marketed to individuals—
policyholders make periodic premium payments in
exchange for coverage
o Term life
• beneficiary receives payout at time of death
• if insured lives beyond the term of the contract, no
benefits are paid
o Whole life
• policy protects over entire lifetime
• beneficiary receives face value of contract upon
death
• has value and can borrow against it
Copyright 2014 by Diane Scott Docking
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Life Insurance
o Endowment life
• beneficiary receives payment at time of death
• if insured lives beyond the term of the contract,
insured receives face value of the contract
o Variable life
• premiums are invested in market securities
• value of policy depends on the value of the
securities
o Universal life
• allows the insured to change both the premiums and
the maturity of the contract
o Variable universal life
• a universal policy where the premiums are invested
in variable rate earning assets
Copyright 2014 by Diane Scott Docking
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Life Insurance
• Group life insurance covers a large number of persons
under a single policy
o contributory—both the employer and the employee
cover a share of the premiums
o noncontributory—the costs are borne entirely by the
employer
• Credit life insurance protects lenders against borrower
death
Copyright 2014 by Diane Scott Docking
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Property & Casualty Insurance
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Videos:
http://www.youtube.com/watch?v=BQr8bkuPZDs
http://www.youtube.com/watch?v=x58tgSOFYNs
http://www.youtube.com/watch?v=2Ga3tGWOgF
Copyright 2014 by Diane Scott Docking
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Property & Casualty Insurance
• Property insurance involves coverage related to the
loss of real and personal property
• Casualty insurance offers protection against legal
liability exposure
• Types:
o Auto
o Home owners
o Renters
Copyright 2014 by Diane Scott Docking
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Property & Casualty Insurance
• Property insurance involves coverage related to the
loss of real and personal property
• Casualty insurance offers protection against legal
liability exposure
• Types:
o Auto
o Home owners
o Renters
Copyright 2014 by Diane Scott Docking
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Property & Casualty Insurance
• Property insurance involves coverage related to the
loss of real and personal property
• Casualty insurance offers protection against legal
liability exposure
• Types:
o Auto
o Home owners
o Renters
Copyright 2014 by Diane Scott Docking
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Major P&C lines
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-term Care Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-term Care Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-term Care Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-term Care Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-term Care Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-term Care Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-Term Care (LTC) Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Health Insurance
• Health Insurance
o HMO – Health Maintenance Organization
o PPO – Preferred Provider Organization
o POS – Point Of Service plan
• Dental Insurance
• Vision Care Plans
• Mental Health Plans
• Long-Term Care (LTC) Insurance
• Medicare
• Medicaid
Copyright 2014 by Diane Scott Docking
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Other Insurance
• Disability Insurance
o Social Security
o Private
• Workers’ Compensation (Workman’s Comp.)
• Unemployment Insurance
Copyright 2014 by Diane Scott Docking
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Other Insurance
• Disability Insurance
o Social Security
o Private
• Workers’ Compensation (Workman’s Comp.)
• Unemployment Insurance
Copyright 2014 by Diane Scott Docking
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Insurance Regulation
• During the financial crisis Congress considered adding a
federal regulator of the insurance industry, but left
regulation to the states
• Dodd-Frank bill created the Federal Insurance Office
(FIO) that reports to Congress and the President on the
insurance industry
o The FIO is supposed to identify systemic risks arising from
insurers, monitor international insurance events, eliminate
state regulatory gaps and encourage the offering of
insurance products to underserved segments
Copyright 2014 by Diane Scott Docking
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Conclusion
A necessary evil. You have to have it!
Copyright 2014 by Diane Scott Docking
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