the municipal secretary desktop reference manual - Southwestern ...

NOTE: Insurance is like taking a bet -- the insurance company takes the bet or risk it
can afford to pay. The company takes its winnings in the form of premiums paid by you
and when it pays a claim, it loses. Even when it loses, it makes money because of the
spread it has achieved, i.e., one person's premium helps pay another's loss while other
premiums are profit.
D. INSURANCE TERMS
1. Insured: buyer of insurance, the customer (called second party)
2. Insurance company: The seller of insurance (called first party)
3. Agents: Representatives of an insurer with the power to act on behalf of the insurer.
a. Independent agents -- those representing many companies
b. Captive agents -- those representing only one
4. Brokers: Do not directly transact business but do locate insurers to accept business of
client agents
5. Underwriters: Employees of an insurance company who review applications for
insurance and either accept or reject
6. Public: All those who, when injured, want restitution or payment from you or the
insurance company representing you. (called 3rd party)
7. Claimant: The member of the public making a claim
8. Risk: Uncertainty or chance of loss
9. Peril: Cause of a loss -- fire, lightning, theft
10. Hazard: Condition which increases probability that a peril will cause a loss. (faulty
wiring -- ice on sidewalk)
XIV-8