DICTIONARY OF INSURANCE TERMS

Rates used by an insurer that are not statistically credible because adequate data does not exist for that particular coverage or class. Such rates are based on the experience and best judgment of the underwriter for each individual risk.

(See American Academy of Actuaries.)

Alliance of American Insurers
(See: 1. accredited adviser in insurance; 2. Alliance of American insurers [also see Property Casualty Insurers Association of America.])

(See African-American Insurance Professionals Association.)

The rating bureau for inland marine, aircraft hull and package insurance fields for insurers choosing to participate. Formerly Transportation Insurance Rating Bureau. Headquarters: Bensenville, IL.

Associate in Automation Management designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

A trade association of independent insurance general agents serving the interests of insurance companies and local agents. Provides markets for all types of insurance with emphasis on surplus and specialty lines. Established in 1926. Headquarters: Washington, DC.

Formerly a pool of aviation risk underwriters formed in the 1920s. AAU is now, through a merger with a British aviation insurer, known as Global Aerospace.

1) In ocean marine insurance, the transfer by the insured to an insurer of all rights, title, and interest in and to the insured property, in return for the sum insured. It is effected by the insured’s tender of such transfer (notice of abandonment) and the insurer’s acceptance. A valid tender can be made only when the facts show that there has been a “constructive total loss” or “actual total loss” of the insured property through an insured cause of loss. In such case, however, the insured can recover the sum insured as for a total loss, even though the insurer has refused to accept the tender and there has been no abandonment.

2) The word also appears in “sue and labor” clauses of various inland marine policies by way of a stipulation that compliance with the requirements of the clause shall be without prejudice to either the insured or the insurer respecting waiver or acceptance of abandonment.

3) In property insurance, abandonment is relinquishing ownership of damaged property to an insurer to permit a total loss claim to be made; but most commercial property coverage forms, dwelling policies, and the homeowners policy prohibit such abandonment. Instead, these policies require the insured to protect damaged property from further loss.

(See abandonment clause.)

The actual provision in an insurance contract, usually ocean marine, inland marine or property, that refers to abandonment and whether or not it is allowed by that particular policy.

(See abandonment, actual total loss, and constructive total loss.)

Associate, Casualty Actuarial Society designation sponsored by the Casualty Actuarial Society. Headquarters: Arlington, VA.

Two or more insurance policies with consecutive policy periods providing common insurance to an insured.

Those cases where the policyowner or insured has full and absolute rights to assign, sell or give away all rights to a policy to another party.

(See absolute assignment and assignment.)

Liability that exists and is imposed upon a party, even though no negligence or fault was committed by that party. Absolute liability is most often imposed when the circumstances of the operation, product, or activity are considered highly hazardous or dangerous.

A provision in a life insurance policy stating that the beneficiary cannot be changed unless the insured obtains the beneficiary’s consent.

(See irrevocable beneficiary.)

When the policyowner or insured transfers or assigns all of the rights and subsequent control in a policy to another party or entity.

(See assignment and absolute ownership.)

(See Association of British Insurers.)

In a life insurance policy, this is when the benefits (or payoff) are paid before the death of the insured person in cases where that person is terminally ill and may need those benefits for medical and living expenses.

With respect to life insurance, some policies will offer an option to convert the policy into an endowment before its normal or set maturity date by using the accumulated policy dividends for this purpose.

(See accelerated option.)

With respect to life insurance, some policies will offer an option to convert the accumulated policy dividends and cash value to pay off the policy.

(See accelerated endowment.)

The taking of risk (by an insurer or other person authorized to act for that insurer, such as an underwriter) by expressing a willingness to issue insurance. Also known as assume.

An event or occurrence that is unintended, unforeseen, and unexpected; something which could not be considered as a foreseeable occurrence and consequence of an undertaking; a casualty or mishap.

A broad term describing protection from loss because of illness or injury which may result in loss of life, loss of earnings, or expenses incurred. Within the broad area of health insurance, there are several major coverages which focus on more specific needs.

(See disability income insurance, health insurance, hospitalization insurance, and sickness insurance.)

Inspection and engineering work on insured risks to help remove potential causes of loss. Loss prevention work applies to both property and casualty insurance and is also referred to as safety engineering, accident prevention, accident control, or loss prevention.

1) A summary of claims activity, which details the insured’s frequency of accident to a selected unit of measurement, thus making the loss experience more meaningful.

2) In workers compensation insurance, the rate of disabling injuries, number of lost work days due to accidents, or the number of first-aid cases are among items that may be considered in an accident experience.

The determination of how often the rate or frequency of accidents occur at a particular operation, site, location, or to the insured as a whole for a specified period of time for the exposure units involved. These ratios and calculations are used to determine and verify the projected claims and loss exposure a risk may experience in order to price and set rates, claims services, and loss control services needed. Use of accident frequency ratios over a period of time for a specified risk also may be used to determine if loss trends are improving and if the loss control services are effective.

Insurance covering death, dismemberment, loss of sight, loss of income, and medical expenses caused by accidental injury.

Policies issued to cover death, dismemberment and medical services for accidents only.

All the ways and means used to avoid the occurrence of an accident or to reduce its consequences if it does occur, such as the control of personal performance, machine performance, and physical environment, including the training needed to reduce the number of accidents and cost of accidental injuries. Accident prevention is one of the less publicized functions of risk managers and insurers, many of which improve safety in industry, the home, and on the roads through safety engineering and research. Also called loss prevention, safety engineering, accident control, or loss prevention.

A person with expertise in evaluating accident circumstances (such as vehicle or craft speed, lighting conditions, weather, influence, substances, reaction times, safety equipment, human factors, etc.) in order to report on that accident’s cause (and sometimes whether the applicable accident could have been avoided) .

Either the report that is used to document the time, cause, results, injuries, parties, and other pertinent facts of an accident for insurance purposes or a similar type of report prepared by law enforcement persons as a result of an accident.

A formula or calculation used to determine a ratio for use in evaluating how serious or severe an insured’s accidents or injuries are, such as the ratio of the amount of loss to the value of property in property insurance, or the amount of loss to exposure units in liability or workers compensation insurance.

Simply stated, it is the statistical matching of all losses occurring (regardless of when the losses are reported) during a given 12-month period of time, with all premium earned (regardless of when the premium was written) during the same period of time. Calendar year experience, on the other hand, is the statistical matching of all losses incurred (not necessarily occurring) within a given 12-month period, usually beginning on January 1, with all premium earned within the same period of time. Yet a third related term is policy year experience which, to put it simply, is the statistical segregation of all premiums and losses attributable to policies having an inception or renewal date within a given 12-month period.

(See calendar year experience and policy year experience.)

Bodily injury to a person or persons that has been caused accidentally and with unforeseen results.

Any death that results from causes other than natural causes or homicide.

A specific type of life insurance policy that pays benefits in the case of the death or dismemberment of the insured from accidental causes. If dismemberment occurs, benefits are paid on a periodic basis, such as weekly, bi-weekly or monthly for the injury. The amount of the benefit payment is based on the type and severity of the dismemberment.

Some life insurance policies have provisions that provide for an additional benefit payment in the case of an accidental death.

(See double indemnity and multiple indemnity.)

A life insurance policy that pays a benefit only in the event that death was accidental.

The cause of a result which was not intentional.

Injury or damage that is caused by an unexpected and unforeseen incident, event or series of events.

A line of business an insurer accepts which does not meet all or most underwriting criteria but which is accepted for other reasons:

1) the value of the total account, the producer, or the center of influence

2) to help a good producer, and thus possibly obtain more submissions from that producer.

A monthly report between an agent and the insurer, which includes policy numbers, premiums, and applicable commissions on business produced by that agent.

A person whose duty is to specifically service an account or group of accounts for an agency or brokerage firm.

Rating plans that have been developed for accounts and that apply to specified lines of business, most often property lines. Usually based on some combination of size and loss ratio with respect to that individual account. These rating plans can result either in credits or debits to the risk.

An insurance sales strategy that focuses on handling all of a client’s coverage needs rather than handling only a portion of those needs. The method is one that improves customer retention.

A form of professional liability insurance covering the negligence of accountants in their professional practices.

Coverage that protects businesses against their inability to collect their accounts receivable because of the loss of supporting records that have been destroyed by a covered cause of loss. Also covered are the extra collection expenses that are incurred because of such loss or damage and other reasonable expenses incurred to re-establish records of accounts receivable after loss or damage.

Life insurance purchased at airports by passengers on scheduled airlines. The face value of the policy is paid to the beneficiary in the event of death on that particular flight. Also called air travel insurance.

A specific accounting method that records credits and debits when the income and expenses actually occurred rather than on the date they are actually paid or received.

Refers to the amount of benefit that accrues for an individual participant of a defined benefit pension plan. The benefit is often calculated as a percentage of salary combined with years of service, but it is not paid until normal retirement age.

One of the dividend options of participating life insurance policies. Dividends paid by the insurer are left with the insurance company to accumulate interest.

If a company fails to fund the qualified pension plan to the minimum levels required by law it has a funding deficiency. Such plans (and their sponsors) are subject to penalties and other legal remedies designed to correct the situation before participants are hurt by the underfunding.

This is a life insurance term that reflects the increase in value and, therefore, the subsequent benefits available for payouts as the life of the policy progresses and the premiums paid into the policy have a chance to accumulate and earn income for the insurer.

With respect to health and medical insurance policies, it normally refers to the amount of time within each policy period that is available to the insured to satisfy the deductible amounts.

Variable annuities are invested in equities called side funds. The monies paid into the annuity are placed into the side funds and one way to represent their value is in units. For example, a $100 annuity premium may purchase 2.3 units this month and 3.2 units next month because the value of the equities in the side fund has fallen.

Specifically applicable to universal life insurance policies, this term is used to express the sum total of all the premiums paid and interest accrued without regard for deductions made for benefits, expenses, etc.

An international organization that sponsors the certification of professionals trained to detect, investigate and prevent fraud and white collar crime. Headquarters: Austin, Texas.

A specially designed property policy to provide coverage to property for loss from acids and chemical contact or spills. Related coverage to consider would be a difference in conditions insurance.

(See difference in conditions insurance (DIC).)

A nonprofit insurance facility dedicated to serving the independent agency system in the USA by developing and maintaining standard application forms, providing electronic data interchange standards and other support of agency automation. ACORD is located in Pearl River, NY.

Standard application forms, used nationwide, for gathering the necessary data needed to rate, classify and underwrite requested insurance coverages. These forms come under the auspices of the nonprofit ACORD insurance association.

A network created and supported by ACORD. Its purpose is to encourage greater use of standardized processes and procedures between insurance carriers and agents.

1) The cost of selling insurance. Normally the agent’s and broker’s commission, but in some cases the term is used to designate any cost of putting the business on the books.

2) In rate filings by insurers with state insurance departments, one of three expense elements shown: general expenses, commissions, and other acquisition costs (such as advertising and service office expenses).

Associate Customer Service designation sponsored by the Life Office Management Association. Headquarters: Atlanta, GA.

Accredited Customer Service Representative designation sponsored by the Independent Insurance Agents of America. Headquarters: Alexandria, VA.

An event beyond human origin or control (lightning, windstorms and earthquakes are examples), the damage from which would not be the responsibility of an insured. Acts of God are excluded under certain liability insurance policies.

(See catastrophe bond.)

Omissions, conditions, offenses or acts which could result in contractual or legal action. Example: If an insured does not file the required proof of loss on an insurance policy within the specified period of time, that omission is actionable, meaning the coverage on the claim may be denied.

A life product where an unallocated fund is maintained for the active members of the fund. Fund assets are included under a deposit accumulation plan. When a member retires, an individual annuity is purchased for the member with the resources within the fund.

Life insurance reserves set up to accommodate the present value of future death claims. Since claims are usually low in the early years of policies but increase throughout the life of the policies, the expected results are that the reserves are overstated during the early years and understated in the later years when viewed on an individual policy basis.

With respect to products liability, this term refers to a product that actually results in damage or injury to a user’s property when put to use as originally designed and intended.

This is a health insurance policy provision. It stipulates that on the date a group insurance contract becomes effective, an employee who is absent due to an accident or illness is ineligible for coverage until he or she returns to work.

The level of operating responsibility that an insurance carrier deliberately assigns to an agent.
(Also see express authority and implied authority.)

The basis of loss settlement in property insurance policies, which takes into consideration factors such as replacement value less depreciation, market value, rental value, the use of the building, the area in which it is located, obsolescence, assessed valuation, and any other factor that would have an effect upon the value. A working rule-of-thumb definition, however, is “replacement cost new at the time of loss, less depreciation.”

(See replacement cost insurance.)

When insured property is so badly damaged by a covered cause of loss that it is not repairable or recoverable or when there is so little remaining of the salvageable or repairable nature that it no longer has any value, it is considered an actual total loss. This usually signifies the maximum settlement possible under the terms of the policy.

(See abandonment clause.)

This term refers to the revisions that are made to reserves or premiums, based on a company’s experience and projected claims.

Estimated factors used by an actuary to project future financial situations. The factors forecasted may include such items as premium levels, company expenses, or loss reserves.

When plans or coverages have benefit differences, this term is used to explain the degree of difference when comparing the benefits of the different plans.

A method used to determine future benefits based on present fixed contributions or the contributions necessary to reach a desired benefit level at some time in the future.

In order to statistically compare data on unlike items, products or factors, mathematical or actuarial equivalencies are set.

A method developed by the actuarial operation to set the amounts of contributions and the intervals of those contributions that are necessary to achieve the benefit(s) offered.

With respect to insurance company operations, actuarial calculations are used to predict or determine the necessary rate, premium, expense and reserve levels, etc., needed to accomplish goals. When the actual results are better than those set or predicted, actuarial gains are achieved; and when results are worse than those set or predicted, losses are experienced.

(See experience.)

A term used to designate the current value that has been assigned to future benefits, including contingencies for factors such as early payouts of benefits.

(See present value.)

A report outlining current conditions or future requirements of an insurer, self-insured or pension fund necessary to meet its obligations. The report is prepared and signed by an actuary.

The science of using data, statistics and mathematical calculations to make rate, premium, coverage, loss/ claims, benefit and other pertinent decisions as applied to the insurance industry.

This society consists of actuaries and actuarial students in South Africa. Founded in 1948, it promotes professionalism among its members who work (or plan to someday work) in the country’s financial services sector. It promotes conferences for networking and continuing education. Headquarters: Cape Town, South Africa.

The review and evaluation of the creditability of some specific aspect of the insurance operation at a given time. For example, a valuation of the creditability of a reserve for a line of business as of a specified date and time.

Professional liability insurance developed for actuaries and pension consultants and their unique and special needs.

A social mathematician who uses mathematical skills to define, analyze and solve complex business and social problems involving insurance and employee benefit programs. The work of actuaries involves the various contingencies that face human beings: birth, marriage, sickness, accident, loss of property, legal liability, retirement and death, and the financial effects which these and other contingencies have on various insurance and benefit programs. Many of these programs involve long-range financial obligations, for which actuarial forecasts are fundamental in maintaining a sound financial basis: rate-making, premium and loss reserving, investment valuation, pension benefits, and insurance statistics, among others.

A federal act designed to set standards to remove the barriers to employment, transportation, public accommodations, public services, and telecommunications that exist to those members of our society who have physical disabilities of many types. The act encompasses many aspects of everyday life and generates wide-ranging implications for almost every commercial business or service.

In a life insurance policy, this is when the benefits or payoff are paid before the death of the insured person in cases where that person is terminally ill and may need those benefits for medical and living expenses.

Coverages provided under a policy that are extras, supplementing the main coverages.

Life insurance benefits offered should death occur during a specific time period or as a result of specific causes.

(See death benefit and double indemnity.)

A clause used in some whole life insurance policies that allows the insured to choose to make unscheduled premium payments. This type of provision is common in policies that pay variable rates of interest on deposit premiums or that allow for the purchase of additional insurance coverage.

Additional causes of loss added to property policies which include items such as vandalism and malicious mischief, water from ruptured plumbing and heating systems, glass breakage, ice, snow and freezing, and falling trees and collapses. This coverage is rarely used and has been replaced by the broad or special cause of loss forms as they relate to property insurance.

A person, other than the named insured, who is protected by the terms of the policy. Usually a specified individual such as a spouse or a member of the insured’s family but sometimes, as in automobile insurance, any person, provided that person is driving the insured vehicle with the insured’s permission.

Insurance for the extra amount it costs an insured to live until repairs are made to the insured’s dwelling.

A workers compensation endorsement used to provide additional medical benefits in excess of those required by the workers compensation law of the state jurisdiction(s) covered in the policy.

A party, other than the first named insured, that has been shown as an insured in the policy Declarations or in an addendum to the policy Declarations or by endorsement once the policy has been issued. This party has the status of named insured.

When a policy has been issued subject to rate, audit, inspection; is assessable; or when the policy is endorsed; the additional premium is the extra amount due, over and above the initial premium stated in the Declarations. Such premium is charged for increased exposures, retrospective rate calculations, additional coverage, or premium audit.

Additional clauses or provisions that have been added to the basic coverage form insuring agreements, to the benefit provisions of a policy, or to the standard/uniform provisions which have been added to clarify, define, broaden, exclude, or limit the coverage normally provided.

Section of the federal or national court system that deals with matters pertaining to vessels, crew and their cargoes navigating on interstate or international waters. Maritime procedures, precedents and rules are different in admiralty courts than in other courts.

Sometimes called the fifth dividend option in a participating life insurance policy, paid dividends are entered as a single net premium to purchase one-year term insurance.

(See rate adequacy.)

A type of contract in which the conditions of the contract are drawn or written by the insurer with no input from the insured who must adhere to the terms and conditions as set forth, and who has little recourse to negotiate for better benefits or terms. If there is any ambiguity when a contract of adhesion has been written, court decisions and rulings will be in favor of the party who did not have control of the wording of the provisions; in this case the insured.

One building is adjacent to another if it is very close to another building although not actually touching it, with no intervening building.

When a building is so located that it touches another building.

A form of life insurance where the insured is permitted to adjust either their insurance coverage or premiums. The effect of increasing premiums without increasing coverage is that more cash tends to accumulate. Keeping coverage the same while decreasing premium will make the policy look more like term insurance because there will be less cash accumulation. Universal life is also called flexible premium adjustable life insurance.

A policy in which the exposure basis is a variable (such as sales or payroll), which can be determined only at the end of the policy term.

(See audit, and reporting policy (or form).)

Policies issued by an insurer that do not guarantee the premium upon renewal. At each subsequent renewal the policy may be re-rated and bear premiums that may or may not be substantially different than the previous period premium.

(See annualization.)

This is a form of business income (interruption) insurance, but with a twist. Rather than acting as a contingency against a halt to ongoing activity, it protects against a delay in getting new operations up and running on time. Naturally the delay has to be due to a source of direct damage that is eligible for coverage. Typically such insurance must be negotiated on a customized basis.

One who determines the amount of loss suffered. A “company” adjuster represents the company. A “public” adjuster represents the policyholder. An “independent” adjuster may be hired by either.

A type of insurance designed to provide coverage for adjusters for their errors, omissions, or negligent acts committed while performing the functions of their job. This coverage is available for individuals, firms or insurers.

The process of handling and settling claims by determining the amount of a loss an agreeing on the amount requested by a policyholder or claimant because of a loss or damages suffered. Also referred to claims adjustment.

An organization that maintains a staff of adjusters and whose business it is to adjust losses for those companies which refer their losses to the bureau.

(See General Adjustment Bureau, Inc.)

Those expenses that are directly attributed to the process of handling or adjusting claims, but which specifically exclude the actual claims payment amounts. Expenses may include items to investigate the claim, forensic reports, and cost of research.

A life insurance benefit which provides the beneficiary with income often used during the interim period while other living finances are arranged; hence, the term adjustment income.

The normal and expected operating costs to run an organization.

Where a self-insurer pays an insurer or other organization to administer its operations, including benefits and claims.

An individual who has been appointed by the court to administer or manage the estate and affairs of a deceased person. The difference between an administrator and an executor is that an executor is named in the decedent’s will, while the administrator is appointed by the court in cases where there is no will or where the executor cannot or will not fulfill the necessary duties.

(See executor and executrix.)

A term used to encompass anything to do with maritime operations.

Section of the federal or national court system that deals with matters pertaining to vessels, crew and their cargoes navigating on interstate or international waters. Maritime procedures, precedents and rules are different in admiralty courts than in other courts.

The liability posed by the combination of both common and statutory law, as it relates to maritime operations and activities.

A legal proceeding relating specifically to maritime law (including ocean marine insurance issues) and handled in a maritime court.

Those assets, or portions thereof, of an insurance company which under state insurance laws may be taken into account in establishing the financial condition of the insurance company, e.g., agents’ balances or uncollected premiums under 90 days old.

(See nonadmitted assets and assets.)

A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted market or admitted insurer.

A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted market or admitted company.

An aviation specific coverage for passengers or guests aboard aircraft, which precludes the need for those guests or passengers to prove the liability of the insured owner or operator of the aircraft in order to recover for damages suffered in an accident. This coverage is normally written with a maximum limit per seat, and the passenger or guest can recover up to that amount.

A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted company or admitted insurer.

Reinsurers that have been admitted to operate in the states in which they are accepting cessions from primary insurers.

(See admitted company. Same status, except for a reinsurance operation.)

A legal term meaning according to value. Often used with respect to a value bill of lading. A value bill of lading is the receipt issued by the transportation company for goods being shipped and which describes the specifics of carriage, including freight and value of goods.

(See value bill of lading.)

(See alternative dispute resolution.)

A reinsurance industry arrangement in which a ceding company pays its premiums in installments over the period of the reinsurance contract. Ideally the payments should, ultimately, match the amount the reinsurer pays to cover losses. The plan is adjusted at the contract’s end if payments do not balance.

The basic premise behind pension plans is that money accumulates during an employee’s working years in order to “fund” the payment of benefits after the employee retires.

Moneys or payments made for coverage payment prior to the inception of the policy period, usually accompanied by the application or request for coverage.

A provisional or deposit premium charged at the start of a policy term, with the final premium determined after the policy has expired.

With respect to ocean marine insurance, any type of commercial venture which exposes a maritime vessel (including cargo) to potential losses by perils of the sea.

With respect to ocean marine insurance, the clause within the insurance coverage that requires the insured to provide the insurer with an accurate and detailed description of the voyage, which in turn will become attached to and part of the Declarations of the policy and which will be used as the basis for the coverage, underwriting, and pricing of the insurance policy.

The insuring of one or more risks with a higher chance of loss than that contemplated by the applicable insurance rate. The selection of such risks is adverse because the rate is inadequate. Also called anti-selection.

Any underwriting decision that either rejects the request for coverage or offers coverage that is less than what was originally requested. It includes decisions that in any way restrict or limit coverage, call for higher pricing or increased deductibles, apply substandard classifications or places in residual markets, or assign risk pools or state pools.

Covers an insured against claims for libel, slander, defamation, infringement of copyright, invasion of privacy, etc., arising out of its advertising program. Also available for radio and television stations and advertising agencies.

Damages or injury sustained by a claimant in the course of the advertising activities of the insured which included such injury as libel, slander, violation of the right to privacy, misappropriation of advertising ideas, or the infringement of copyright.

One of the three basic forms of insurance organizations: rating bureaus, advisory organizations, and trade associations. Rating bureaus make and file rates, loss costs, rating plans, schedules, manuals and forms for members, subscribers and service purchasers who choose to use them. Advisory organizations perform advisory functions for insurers relative to these rating bureau activities and, like rating bureaus, are licensed by state insurance departments, subject to examination and other regulation. Trade associations are cooperative organizations to protect the business interests of their member insurers, producers, adjusters, attorneys, or other groups. Either a rating bureau or an advisory association can function as a statistical organization, and the function of advisory organizations and trade associations can overlap. Distinctions in functions can best be appreciated by understanding that, historically, rating and advisory organizations were licensed and regulated under state rating laws because of the public interest in the cooperative activities of insurers, relative to pricing and the need for regulation, in order to replace application of antitrust laws.

(See rating bureau and trade association.)

(See architects and engineers coverage.)

A company that is operated independently from other related companies but has some type of common ownership with those companies, such as the same set or sub-set of owners or stockholders.

An association or partnering of health care providers that collectively offer health care coverages to a specific group of patients.

A group of persons with some area of interest in common (such as a job, hobby or employer) that is turned into an association to which insurance products are marketed on a group rather than an individual basis.

(See target marketing.)

An acknowledgment or affirmation by the insured as to the credibility or verification of certain facts or conditions pertinent to the issuance of the policy.

An association that promotes the advancement and enhancement of the image of African-American professionals whose job responsibilities are related to the insurance industry. The association is also dedicated to educating the public about insurance careers and to improve network opportunities. Headquarters: Los Angeles, CA.

Associate in Fidelity and Surety Bonding designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

The care, follow-up treatment, or therapy needed by a patient who has recently undergone surgery, accident, or illness.

In some fire insurance rating schedules for commercial property, certain additions or loadings on the rate are made for defects (such as poor housekeeping or minor wiring defects) that can be easily corrected. The purpose of separate charges for such defects is to encourage their prompt correction, in which event the rate will be lowered by the amount of the after charges.

With respect to a life insurance policy, it is the provision that allows the insurer to adjust the death benefit payment if the age of the insured was misrepresented, and if that misrepresentation has been proved.

An Associated General Contractors of America standing committee. It assists various surety organizations with policy questions related to forms, industry issues and products.

(See Associated General Contractors of America.)

In life and health insurance, a concept that allows the insurer to set a procedure to determine the “age” of the insured and when that age changes to another year to be used in the setting of rates and benefits. When used for life insurance contracts, it is common to use the date midway between the insured’s natural birthdays. When used by health insurers, it is common to use the insured’s age of the previous birthday.

Federal legislation prohibits mandatory retirement at age 65 and requires pension plans to continue funding individual accounts and benefit accruals if an employee should work after the age of 65. The law also provides protection for older employees (aged 40+) from discriminatory hiring, firing and other practices.

For certain coverages or types of policies, insurers will set minimum and maximum age limits in order for applicants or insureds to remain eligible. Should an existing insured reach the maximum age limit, coverage may not be offered for renewal.

It is the age (which varies by state) when an individual may legally enter into and be bound by the terms of any contract. Until the age of majority a minor may not apply for life insurance without the signature of a parent or guardian.

A simple letter that a new agent sends to an insurer as formal notice that he or she has been authorized to take over an insurance account from another agent. It permits the insurer to change its records to reflect the change.

A business office whose function is the sales of insurance and insurance products. An agency may be owned or run by a general agent, manager, independent agent, or company manager. The principal is responsible for the statements and actions of agents performing within the scope of authorization specified in the agency agreement.

(See captive agent, general agent, and independent agent.)

An insurance company’s formal agreement to grant an agency the authority to represent the company and sell its insurance products.

Insurers who use agents as their sales force when producing insurance business.

The legal contract drawn to establish the terms and conditions used as the basis of the relationship between an insurance company and its agency force.

This term refers to those insurers who use agents as the company’s sales organization and includes both captive and independent agency forces.

A very specific type of reinsurance arrangement in which a contract is drawn between insurer and reinsurer covering only the specified business that is produced by a specific agent of that ceding insurer.

A management position of an insurance company. An agency superintendent usually oversees a territorial division and the agents within that territory. Often strictly a production person, as distinguished from one in charge of certain lines of insurance.

One who has the authority to act for another. In insurance language, an agent is the person who sells insurance by contacting the policyholder. By contract and by law, the agent is endowed with many of the powers of the company itself. There are various types of agents, based upon the contractual relationship with the insurer they represent.

(See independent agent, exclusive agent, and broker.)

The agent who has been recognized by the insured or customer as his or her authorized representative for handling the specified insurance transactions.

The authority that has been legally granted to an agent in the agency contract between the agent and insurer.

Based on the commission schedule set forth in the agency contract between the insurer and agent, the agent’s balance is the detailed statement of commission credits or debits earned by the agent on the business written with that insurer.

The income or remuneration earned by an agent for writing business with an insurer, usually based on commission or specified percent of premium placed by that agent with the insurer. The commission schedule (the percent of premium for the business placed) is set forth as part of the agency contract with the insurer.

(See commission.)

A type of professional liability insurance designed for agents covering professional acts, errors, and omissions that may occur during the performance of their duties as an agent.

The license issued by a state which confirms that an agent has completed the requirements and has been given authority to conduct the specified types of business for the time period indicated. Often, agents must qualify for a license by examination, and licenses must be renewed annually with proof of continuing education.

Laws that define standards of insurance knowledge that an individual must meet in order to be licensed as an agent.

The maximum amount an insured is able to collect under a single policy regardless of the number of claims, injuries, accidents, or number of insureds.

Under this deductible provision, an insured qualifies for insurance payment only after all eligible, incurred losses during the policy year exceeds the established deductible amount.

Coverage developed for operations that fully or partially retain (self-insure) their losses, subject to a specified maximum loss amount. When accumulated annual losses exceed the established maximum, any remaining (subsequent) losses are paid by the aggregate excess policy (subject to that policy’s limit).

A company wishing to protect itself in the event its net loss ratio for a given year rises above a certain percentage, may buy reinsurance which pays in excess of that figure up to a higher agreed percentage beyond which the company is once more liable. In short, a plan which takes the sting out of an above-average net loss ratio. Also known as stop loss reinsurance or excess of loss ratio reinsurance.

(See claims series clause.)

A method where the necessary contributions for a pension plan are calculated for the entire group of plan participants. This approach is less expensive than performing individual calculations.

The most that an insured or beneficiary is allowed to collect in indemnity benefits under that policy as a result of any one disability or in that policy period.

In a policy providing such an aggregate limit, the maximum amount the insurer will pay during the policy period, irrespective of the policy’s limit of liability.

(See limit or limit of liability.)

Treaty reinsurance in which the ceding insurer retains a portion of each risk plus an aggregate amount of loss in excess of each retention.

A vendor who combines information from information publishers with similar characteristics (rating, underwriting, forms analysis, etc.) into larger packages. Value is derived from cost savings or the ability to reach a larger market and charge higher prices from bundling multiple products.

The amount of coverage that the insurer and insured have mutually agreed to be the value of the property at the time the insurance is purchased.

A condition of a policy stating that the insurer agrees to waive the coinsurance requirement in consideration of the insured’s maintaining insurance equal to the amount agreed upon at the inception of the policy.

An agreement made between the insurer and insured at policy inception confirming that both parties concur that the limit of insurance set forth in the schedule of property is that item’s value, and that agreed upon value is the amount that will be paid by the insurer in the event of a total loss.

A condition of a policy stating that the insurer agrees to waive the coinsurance requirement in consideration of the insured’s maintaining insurance for the scheduled item, equal to the value agreed upon at the inception of the policy.

An inland marine policy tailored to insure the equipment found on a farm or ranch. Available with causes of loss on an “all-risk” or “specified cause of loss” basis.

A trade association of primarily stock property and casualty insurers that performs numerous functions, such as fire and accident prevention, reviews of insurance legislation, research, setting of building and fire department standards, arson and fraudulent claims investigations, etc. Headquarters: Washington, DC.

Associate in Insurance Accounting and Finance designation sponsored by the Insurance Institute of America, headquarters: Malvern, PA, and the Life Office Management Association, headquarters: Atlanta, GA.

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

Associate in Claims designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)

(See Association of Insurance Compliance Professionals.)