Insurance Companies Copyright 2014 by Diane Scott Docking1

Learning Objectives Understand the different types of insurance companies Understand the various insurance products offered by: o Life insurance companies o Property and casualty insurance companies o Health insurance companies o Other insurance companies Copyright 2014 by Diane Scott Docking2

Types of Insurance Companies Life Insurance Property & Casualty Insurance Health Insurance Other Copyright 2014 by Diane Scott Docking3

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 Docking4

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 Docking5

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 Docking6

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 Docking7

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 Docking8

Property & Casualty Insurance Videos: Copyright 2014 by Diane Scott Docking9

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 Docking10

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 Docking11

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 Docking12

Major P&C lines Copyright 2014 by Diane Scott Docking13

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 Docking14

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 Docking15

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 Docking16

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 Docking17

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 Docking18

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 Docking19

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 Docking20

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 Docking21

Other Insurance Disability Insurance o Social Security o Private Workers’ Compensation (Workman’s Comp.) Unemployment Insurance Copyright 2014 by Diane Scott Docking22

Other Insurance Disability Insurance o Social Security o Private Workers’ Compensation (Workman’s Comp.) Unemployment Insurance Copyright 2014 by Diane Scott Docking23

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 Docking24

Conclusion A necessary evil. You have to have it! Copyright 2014 by Diane Scott Docking25